Fast-forward 43 years, and the business that is now Activision Blizzard has been purchased by Microsoft, one of the industry's major platform owners, for a whopping US$68.7 billion (approximately A$95.6 billion) — the greatest sale in the video game industry's history.
This transaction is also significant in terms of the game properties that Microsoft currently controls; it now owns blockbuster franchises including Call of Duty, Diablo, Star craft, Candy Crush, and World of Warcraft. And tens of millions of fans will be wondering what this shift in ownership means for them.
Why Now?
In the video game industry, multibillion-dollar purchases are nothing new. When Activision and Blizzard merged in a US$18.9 billion agreement in 2008, Activision Blizzard became one of the top video gaming firms. Microsoft and Sony often purchase popular pre-existing development studios in order to seize control of their intellectual properties (IP) and make them exclusive to their platforms.
Microsoft, on the other hand, has taken a very tough stance. It has made a number of high-profile acquisitions in the previous decade, including Minecraft developer Moving for US$2.5 billion in 2014 and Elder Scrolls and Doom publisher ZeniMax for US$7.5 billion in 2020. With the acquisition of Activision Blizzard, Microsoft has surpassed percent and Sony as the industry's third-largest firm.
This is all part of Microsoft's current video game business plan, which focuses on expanding subscriptions to its Game Pass service rather than selling games. Game Pass, like Netflix and Spotify, allows customers to access a large digital library of games in exchange for a monthly charge.
Microsoft touted that Game Pass has topped 25 million subscribers in its announcement of the Activision Blizzard acquisition. With each subscriber paying US$16 per month, the total monthly revenue is almost US$400 million (or A$556 million).
With the acquisition of Activision Blizzard, Microsoft now has access to many new properties that it may make available through Game Pass, potentially enticing even more users.
Gaming Landlords
Microsoft could make these properties exclusive to Game Pass if it wanted to, driving customers away from competing systems like PlayStation and distribution sites like Steam. To put it another way, it has the potential to draw customers into its own private environment.
This is currently a widely used method. We have all become renters rather than owners of product as a result of subscription-based digital platforms.
This is currently a widely used method. We have all become renters rather than owners of product as a result of subscription-based digital platforms.
Individual video games are no exception. Call of Duty, Hearthstone, and Fortnite (among many others) are no longer single-player games, but rather ecosystems in which players are encouraged to spend money on battle passes, cosmetics, and access to new content on a regular basis.
Meanwhile, the companies that own these games can constantly harvest new data from their millions of players, enhancing the value of their businesses.
Microsoft has basically purchased a city of current renters in the player ecosystems of Call of Duty, Hearthstone, World of Warcraft, and many more properties by purchasing Activision Blizzard.
There are already tens of millions of gamers devoted to closed ecosystems, including those in the difficult-to-enter Chinese market who play Blizzard's Hearthstone and World of Warcraft. All of these gamers can be exploited for personal information and rent.
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