2022/01/18

The deal will be closed in 2023, after its closure, Microsoft will become the third largest gaming company in the world by revenue after Tencent and Sony.

Microsoft has announced its decision to acquire Activision Blizzard, the developer of the iconic Warcraft, Diablo and Call of Duty games, paying $68.7 billion for it. For each Activision Blizzard share, $95 will be paid, which is almost one and a half times higher than the closing level of previous trades ($65.39). After the announcement of the deal, the value of Activision Blizzard securities on the premarket increased by about a third.

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The deal is expected to close in 2023 and after its closure, Microsoft will become the third largest gaming company in the world by revenue after Tencent and Sony.

Under the terms of the deal, Microsoft will acquire the rights to iconic game franchises (in addition to those already named, including Starcraft, Overwatch, Candy Crush), as well as the rights to conduct esports competitions through Major League Gaming. The message about the deal notes that later her games will be added to the subscription service Game Pass (available to Xbox and PC owners), which will provide him with one of the most attractive and diverse lines of game content. At the same time, Microsoft expects to strengthen its position in the segment of mobile games.

"We are investing heavily in world—class content, the development of the gaming community and cloud technologies to open a new era where players and game creators will come first, and the games themselves will be safe, inclusive and accessible to everyone," Microsoft CEO Satya Nadella said about the company's plans.

Competing with Sony

The main competitor of Microsoft in the gaming market is the Japanese corporation Sony. According to statistics from the consulting company Ampere Analysis for the third quarter of 2021, Sony sold 12.8 million PlayStation 5 consoles, while Microsoft sold only 6.7 million Xbox Series X/S — half as many. Nintendo's Switch consoles remain the absolute leader by a significant margin — 89.7 million.

Sony's revenue from gaming and network services for the first quarter of fiscal year 2021 (ended June 30, 2021) amounted to ¥615.8 billion ($5.36 billion). Microsoft's report for the fourth quarter of fiscal year 2021 (calendar ended June 30, 2021) does not specify the exact figures of revenue from games, it is only noted that it increased by $357 million due to the growth in sales of Xbox equipment, partially offset by a decrease in demand for the company's content and services.

Activision Blizzard in its report on the results of the second quarter of 2021 (ended June 30, 2021) reported revenue of $2.3 billion (an increase of 16% compared to the same period last year). Of these, $568 million was brought by sales of goods, $1.7 billion - in-game spending by users, subscriptions and other segments.

The purchase of Blizzard primarily strengthens the corporation's position in the confrontation with Sony in the console market. Sony's key advantage — the number of exclusives - is greatly weakened in the new conditions. "Microsoft clearly sees great prospects in the gaming direction, monetization of the gaming audience and synergy with its other solutions, such as cloud services. As for Activision Blizzard, I believe that it is good for her. In recent years, the company's policy regarding many products has caused dissatisfaction among gamers. In fact, many series were abandoned to the mercy of fate, and, for example, the esports potential of Overwatch, StarCraft 2, Hearthstone and Heroes of the Storm is almost lost. In fact, the company had only an incredibly successful Call of Duty franchise, which set records for sales and monetization. There is no doubt that Microsoft will be able to reverse the negative trend.

In Call of Duty Modern Warfare alone, on average, 2 million people play online at the same time, according to various statistics collection sites. For comparison: Valve's Counter-Strike: Global Offensive is played by 400-500 thousand people at the same time. "Taking into account Microsoft's purchase of the gaming industry giant Bethesda earlier in March 2021, the company is beginning to gradually move towards market dominance. Sony should be afraid of changes in the balance of power in the market, since it will now be more difficult for them to surprise everyone with exclusives.

Michael Zippo
https://linkedin.com/in/michael-zippo-9136441b1
info@e-book.business

Sources: Microsoft, RBC

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