Catching up with the Microsoft / Activision Blizzard acquisition

 It has been quite the ride so far, and there isn’t even a light at the end of the tunnel yet.

It has been a while since I wrote about the Microsoft / Activision Blizzard acquisition. A year, in fact, with only a wider piece about gaming acquisitions in between. Quite a lot has happened since then. Regulators all around the world have launched investigations into the $68.7 billion in cash(!) acquisition of one of the biggest game developers by one of the biggest tech companies in the world.

Since that announcement, a lot has happened. It was to be expected that the deal would be thoroughly scrutinized all over the world. If the big tech companies are too big and have too much power, is a question people have been struggling with for a while and since Microsoft is one of those companies this deal would attract attention regardless of how big it actually is. Plus you know that Sony isn´t happy about its number 1 competitor striking this deal and is, predictably, opposing it.

Even so, things have ballooned to a degree I, and many others didn´t expect. From the regulatory bodies taking a much higher interest in the deal than anticipated to Sony going to war over Call of Duty and Microsoft basically throwing itself under the bus in an attempt to make itself look like the underdog here.

With all of this, I thought a little check-in, and overview might be nice. Without further ado, let’s dive in!

The war over Call of Duty

With the stage set let’s immediately tackle the most vocal current issue. The tug of war between Microsoft and Sony over Call of Duty. Call of Duty (COD) is widely considered to be one of, if not the, most valuable videogame property. It is the single biggest video game series in terms of the sheer amount of games that are sold for each entry. COD is nearly always the top-selling game of the year and over its 20-year history, it has sold over 400 million copies to become the fourth best-selling videogame series, right on the heels of Pokémon.

Call of Duty is a lucrative IP. It’s a series that even people who don’t consider themselves a gamer, the very bottom of the casuals, buy a console just to play it. It’s all of these reasons and more that both Microsoft and Sony have had COD exclusivity deals in place over the years. Sort off. From 2010 to 2015, Microsoft and Activision had a deal in place that COD DLC and Add-ons would go to Microsoft a month early. This deal also meant the Xbox 360 was strongly marketed alongside all of this COD stuff in the marketing campaign. From 2015 to the present day, Sony has held that deal.

Microsofts COD deal with Activision led to the Xbox 360 becoming THE ‘COD-Machine’ during the 7th console generation. Once the deal shifted to Sony, the PS4 became its generation big COD- machine. Became the console that all those casual COD players I mentioned earlier flocked to and that had a sales impact. Losing COD altogether would be disastrous, in their eyes, but losing this deal would certainly be bad for them as well.

Speaking of which: the fear of Sony and many regulators like the FTC is that Microsoftwill make COD an Xbox exclusive. No timed exclusivity or extra content for the Xbox version, no. Hard exclusivity. COD comes to Microsoft-owned platforms, be they physical or digital, only.

I think these fears are sound, though not in the way Sony is presenting them. I do think Microsoft will transition COD to become a Microsoft exclusive. The key word here is ´transition´. I don´t think that Microsoft will ´flip the switch´ on the first day Activision Blizzard is official there´s.

Like they said themselves, Call of Duty is so big that if they kept it from releasing on PlayStation and Steam, it would hurt them more than it would help. The Xbox Series X/S is doing better this generation and Game Pass is a thing but Xbox is still quite a bit behind PlayStation and Game Pass’s subscription numbers aren’t jaw-dropping either. Some gamers will jump ship to Xbox to play COD but I don’t think the casuals will; too expensive. They could drop COD in Game Pass and hope people flock to that cheaper option but how profitable would that really be for them? I know Microsoft has deep pockets and can take sell stuff at a loss so that they can get people in and make the thing profitable later, it’s what they’ve done many times, but that they can doesn’t mean they should.

For this console generation, I believe that they will honour the current deals Activision/Blizzard has in place in regard to games, just like they did with the deals Bethesda had in place. The next generation though, I do think they’ll make COD a Microsoft exclusive. They’ll simply use this generation to build up to COD going exclusive or at least will try to.

The 'cooking the frog in hot water' thing. If you put it in a pot of boiling water, it’ll jump out. If you put it in a pot with cold water then the frog will stay in the pan. I can see Microsoft using the rest of this console generation to make people get used to the idea that COD is a Microsoft thing. Putting it on Game Pass (perhaps not day one, but a few months later), the Xbox version gets unique outfits and stuff. Perhaps even that COD will launch on Xbox first and only to the other platforms days, weeks or even months later.

Even as I´m writing this, Microsoft just accused Sony of misleading the EU over Call of Duty parity. COD is and will remain a big part of this entire thing, for worse if you ask me.

The Power of Microsoft and concerns of streaming and software

I say that because, in my eyes, COD or even all the other intellectual properties, aren´t what worries me. Yes, it would suck if they become console exclusives all of the sudden but I think the major threat lies in how they´ll suddenly use this big portfolio of games to bolster this ‘Metaverse’-like thing they are doing.

What Microsoft is constantly saying is that they will bring these games to many newplayers by putting them on many different devices. Technically speaking this is true: with Game Pass and the like you could play Microsoft games on your Xbox, PC, phone, tablet etc. What Microsoft oh so conveniently is leaving out is that while the physical platform will all be different, the digital platform will be the same. Theirs.

So, even though these games would launch on a variety of devices, they would still be through a Microsoft-owned platform i.e. they would still hold the power. Yes, Xbox might be behind Sony and Nintendo in the console market as they themselves have admitted (throwing themselves under the bus) but would they still be if you combine the console, PC, mobile market and streaming markets? They could very well be the biggest in this overall gaming market with this purchase due to all the other IPS it would get.

They’d get Candy Crush, one of the biggest mobile games. They’d get World of Warcraft, once bigger but still a big MMORPG in the PC space. With COD, Minecraft and their own Halo, they’d have they’d held some of the biggest IPs of each corner of the gaming market in their hand. With that much influence, they could easily implement anti-competitive practices like the FTC and Sony are fearing.

Some of the IP Microsoft would own after the acquisition. 

Give benefits to players when they play through a Microsoft-owned platform like extra content, and earlier content and have games run better on their big digital platform than the competition. Not just through the natural way but because Microsoft puts in their contract that when they put a game on, let’s say, PlayStation their performance is capped.

For now though; I don’t think that’ll happen. Again: pulling COD from PlayStation would hurt more than it would benefit them. I can even see Microsoft bringing more games to rival platforms, mostly Nintendo. They have been dropping a fair amount of games on the Switch. The Ori games, Cuphead and the Banjo-Kazooie and Goldeneye: 007 on Nintendo Switch Online. Xbox and Sony’s audiences are very alike; they both market themselves towards hardcore gamers. Nintendo goes after the families. It makes sense for Microsoft to release, say, colourful 3D platformers on the Switch. They can bore into that audience, make a buck and, with any luck, incentivize these people to get an Xbox, Game Pass etc.

What do the employees think?

Lastly, I want to do a small dive into the human factor. What the employees think and how all of this is/could affect them. That’s a part of this whole deal that we don’t hear a lot about, which means there isn’t a lot of information about this out there, but I think is an aspect that shouldn’t just be disregarded. So I’ve grabbed bits and pieces we have heard and compiled them here.

When taking the Activision Blizzard employees into account is the sexual harassment lawsuit. After a 2-year investigation on July 20, 2021, the California Department of Fair Employment and Housing (DFEH) filed a lawsuit against the company about consistent sexual harassment and discrimination as a result of a toxic, or ‘frat boy’ work culture. This investigation is still ongoing and impacting the deal.

Two groups of shareholders of Activision Blizzard have sued them over the deal. They argue that the deal was made quickly with Microsoft to try to cover up the misdoings of Kotick and his pals that had been uncovered as part of the ongoing lawsuit and escape any liability underselling the company in the progress.

Back to the employees. Within Microsoft, there are also employees that are concerned about the deal because of Activision Blizzard’s toxic work culture. That they are concerned about introducing a “dangerous and unwelcome culture” if Microsoft doesn’t take concrete steps to better the working culture. The Activision Blizzard employees, meanwhile, are more optimistic. They are hopeful that this is what Microsoft will do. Clean the ship of the bad seeds and change the work culture for the better.

At the very least, Microsoft has taken a ‘neutral’ stance when it comes to a new worker union that was formed by its employees just recently. This may or may not have also been done to appease regulators but it is a good thing regardless.

The improvement of the work culture and fortune of the employees themselves is one of the aspects of this deal I found promising and I still find that so today. For them, I do hope this deal will go through so their working conditions will improve.

……..

The Microsoft / Activision Blizzard acquisition is far from a done deal. I do think Microsoft will end up succeeding but enough roadblocks have been thrown up that it will be a hard-won battle. Not the smooth, first half of 2023, that Microsoft was hoping for. Nearly every week we get some new development, from the expected hypocrisy of both Sony and Microsoft to regulators all over the world either agreeing to the deal, blocking it or choosing to dig deeper into it before reaching a verdict. The latter of which I’m in favour of: yes or no, at the very least make sure that your verdict is well-researched and though out by regulators.

Buckle up folks: the circus it’s not over yet.