Activision was the world’s first “third-party” game development company, producing and publishing titles for other companies’ platforms.
Fast-forward 43 years and the company that is now Activision Blizzard has been bought by one of the major platform owners in the industry, Microsoft, for a blistering US$68.7 billion dollars (around A$95.6 billion) – the largest sale in the history of the video game industry.
This sale is also massive in terms of the game franchises Microsoft now has control over; it now owns blockbuster franchises such as Call of Duty, Diablo, Star craft, Candy Crush and World of Warcraft,
Why now?
Big dollar acquisitions aren’t new in the video game industry. Activision Blizzard itself became one of the largest video game companies in 2008, when Activision merged with Blizzard in a US$18 billion dollar deal, But Microsoft has become particularly aggressive in its approach. In the last decade alone it has made a number of high-profile purchases, including Minecraft developer in 2014 for US$2 billion, and Elder Scrolls and Doom publisher ZeniMax in 2020 for US$7 billion. With the Activision Blizzard acquisition, Microsoft is now the third-largest company in the industry, behind Tencent and Sony.
This is all part of Microsoft’s current video game business strategy, which is less about selling game products and more about increasing subscriptions to its Game Pass service.
In its announcement of the Activision Blizzard purchase, Microsoft also boasted Game Pass has surpassed 25 million users. With each user paying US$16 a month, that’s about US$400 million (or A$556 million) in monthly revenue.
With Activision Blizzard, Microsoft now owns a huge new range of franchises it can make available through Game Pass, attracting even more users.
Gaming landlords
If it wanted, Microsoft might even make these franchises only available through Game Pass, forcing customers away from other consoles like PlayStation and distribution platforms like Steam. It could pull consumers into its own exclusive sphere.
This is now a common strategy. Through subscription-based digital platforms, we have all stopped being owners of product and instead have become renters.
This is also true of individual video games. Cod, Hearthstone, Fortnite (and many others) are no longer games that players purchase once, but are instead their own ecosystems in which players are encouraged to continuously spend money on battle passes, cosmetics and access to new content.
Meanwhile, the companies that own these titles can constantly farm new data from their millions of players, further increasing their company value.
With the purchase of Activision Blizzard, Microsoft has effectively purchased a city of existing renters in the player ecosystems of Call of Duty, Hearthstone, World of Warcraft and many other titles.
That’s tens of millions of players already committed to closed ecosystems, including many in the difficult-to-penetrate Chinese market playing Blizzard titles Hearthstone and World of Warcraft. These players can be farmed for more personal data and more rent.
Perhaps this is the important question coming out of the recent sale: not which piece of hardware will have access to which games, but whether Microsoft will take responsibility for improving the work culture and working conditions for game developers? We’ll have to wait and see.
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