There’s nothing like putting your money where your metaverse is - which is precisely how Microsoft is framing its near-$70 billion gambit of trying to buy Activision Blizzard.
Assuming - and this could be a big assumption! - that the deal is not killed by regulators, it would be by far Microsoft’s most expensive acquisition to date. But it’s one that the firm’s CEO Satya Nadella was quick to pitch as playing “a key role” in the growth of the metaverse - and most importantly, putting Microsoft on the front foot and not leaving this virtual turf to mercies of The Company Formerly Known As Facebook.
Explaining the rationale to analysts - and investors who may have a few raised eyebrows at the price tag - Nadella said:
Our vision is for a river of entertainment where the content and commerce flow freely, driving a renaissance across the entire industry to make games more inclusive and accessible to all. And together with Activision Blizzard, that’s what we will be able to deliver. Removing these barriers will only become more important as the digital and physical worlds come together and the metaverse platforms develops. When we think about our vision for what a metaverse can be, we believe there won’t be a single, centralized metaverse and there shouldn’t be.
We need to support many metaverse platforms, as well as a robust ecosystem of content, commerce and applications. In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises, accessible on every device. And bringing fantastic entertainment together with new technologies, communities and business models is exactly what this transaction is about.
Activision Blizzard’s CEO Bobby Kotick also pitched the metaverse angle:
Our Activision Blizzard and King teams have transformed games into social experiences, enabled players to find purpose and meaning through games. And every day, we entertain communities of hundreds of millions of players connected through our franchises. Connecting these communities together is the next step in the creation of the metaverse. The race to do this is accelerating, and the resources required for success are enormous.
So many of the world’s biggest companies have ambitions with their own gaming and metaverse initiatives. Established and emerging competitors see opportunity for virtual worlds filled with professionally produce content, user-generated content, and rich social connections. Our talent and our franchises are critical components of the construction of a rich metaverse.
As investments in cloud computing, AI and machine learning, more sophisticated data analytics, user interface and user experience capabilities become more competitive and more necessary for the exciting gaming future that lies ahead, we will benefit tremendously from having a partner like Microsoft to better enable our ambitions.
That long term vision aside, it’s also clear that there’s a significant short term benefit in shoring up Microsoft’s $10 billion a year gaming business. The acquisition would make it the third largest games company after Tencent and Sony, the latter of which saw its share price slide on new of Redmond’s plans.
Activision Blizzard, home to some of the world’s most famous games, including billion-dollar franchises like Call of Duty, Candy Crush, World of Warcraft, has nearly 400 million monthly active players across 190 countries today. A successful acquisition would significantly help grow Microsoft’s presence in mobile, the largest segment in the gaming business.
Back to Nadella:
For us, when we think about acquisitions, we always start with our mission to empower every person and every organization on the planet to achieve more. Activision Blizzard is one of the premier game publishers worldwide, and their mission to connect and engage the world through epic entertainment is deeply aligned with our own.
Together, our ambition is to bring the joy and community of gaming to everyone on the planet. When I step back, it’s hard to overstate how competitive, dynamic and exciting the gaming industry is today. Gaming is the largest and fastest-growing category in entertainment. The last two years, in particular, have shown how critical games are to helping people maintain a sense of community and belonging even when they’re apart.
Today, 3 billion consumers around the world play games, and we expect this number will reach 4.5 billion by 2030, as new generations turn to gaming for entertainment, community and a sense of achievement. We are seeing more players, more streamers, more titles and more new game publishers than ever before. But too much friction still exists today between content, consumption and commerce. We need to make it easier for people to connect and play great games, wherever, whenever and however they want.
Obviously this is a huge amount of money. An eye-wateringly huge amount of money, far surprising the $26 billion paid for LinkedIn in 2016.
It’s a massive gamble on the metaverse and this is the angle that Nadella and his execs will need to articulate clearly in order to convince twitchy investors that this is going to be value for money.
But there’s another factor at play - that of the regulators on both sides of the pond. The Biden administration is getting increasingly bellicose about perceived monopolistic behavior on the part of Big Tech and that price tag makes this very big Big Tech indeed.
And the regulatory eye isn’t just going to be confined to the implications for the gaming industry - although a brief scan of gaming forums makes clear that there’s a lot of unhappiness at Microsoft’s ambitions to be found. In Europe. The EU’s Competition Commissioner Margrethe Vestager, long-time scourge of US Big Tech, just gave an interview to POLITICO in which she warned that it was important to start asking what she called “the right questions” about the emerging metaverse:
The metaverse will present new markets and a range of different businesses. There will be a marketplace where someone may have a dominant position. Things are happening that we need to be able to follow…In the gaming world, you already have people paying hundreds of thousands of dollars for ‘skins’ and certain items that you can trade. And there are human traders that go in between the seller and the buyer.”
There may be trouble ahead…
On the other hand, there may be some who find themselves rather happy. As one of my colleagues put it:
I know Microsoft can walk and chew gum, but if you're part of their business software competition, don't you take some kind of comfort in a massive/potentially distracting gaming acquisition? They do make money on xboxes. I just think from an enterprise/business software vantage point, you'd welcome this news if you compete against them.
A valid point.