Microsoft (MSFT) Takes Over Activision Blizzard: What’s Next for the Tech Stock?

Microsoft (MSFT) Takes Over Activision Blizzard: What’s Next for the Tech Stock?

Posted On October 19, 2023 9:55 am

Global technology powerhouse Microsoft Corporation (MSFT), worth nearly $2.47 trillion, concluded its $69 billion acquisition of renowned game developer Activision Blizzard, Inc. last week, pulling off history’s most prominent tech deal after two years of regulatory scrutiny and significant resistance from multiple stakeholders in the gaming industry.

The conclusion of this prolonged deal dispels the lingering uncertainty concerning the Microsoft-Activision partnership. However, the key question on everyone’s mind is: What follows this grand acquisition?

The Acquisition and Its Potential Impact

MSFT CEO Satya Nadella, who took the helm in 2014, aims to broaden the company’s business beyond its core operating systems and productivity software domains. ATVI, a partner and competitor to MSFT, stands out among large companies for releasing top-rated games with production values reaching the hundreds of millions.

At the peak of the metaverse trend, the announcement of MSFT’s acquisition of ATVI in January 2022 signaled the grandest deal in historical records. The strategy behind the acquisition was to bolster MSFT’s presence in gaming and the metaverse and establish itself as the unrivaled leader in cloud gaming.

Yet, its fruition faced hurdles due to antitrust concerns. Regulators globally analyzed whether the acquisition might result in excessive market control for MSFT. Eventually, the deal received official clearance last week following approval from the U.K. regulators, marking it the largest deal in MSFT’s 48-year history.

But there is a significant condition accompanying this clearance. For the next 15 years, MSFT has agreed to surrender cloud-streaming rights for all ATVI games outside the European Economic Area (EEA), including 27 European Union member states along with Iceland, Liechtenstein, and Norway.

Ubisoft, a French game publisher, secured exclusive global streaming rights outside the EEA, while within the EEA, it will share these rights with other competitors, including MSFT/ATVI. This marked a pivotal concession from MSFT, which contributed to aligning with UK regulatory standards.

ATVI enjoyed the title of the largest game publisher in North America, hosting various popular games under its belt, ranging from “Call of Duty” to “Diablo” and “World of Warcraft,” amongst others.

MSFT’s acquisition will expand the tech giant’s ownership to include all developers under the acquired banner, ranging from Activision Publishing to King, the creator of “Candy Crush.”  This strategic addition is expected to enhance MSFT’s foothold in the booming mobile gaming industry through synergies with its franchises, such as “Halo” and “Forza,” which could generate significant revenue in the coming years.

With a vast list of ATVI’s titles under MSFT’s umbrella and its robust platforms like Xbox, Game Pass, and Xbox Live, the company is poised to become an even greater force in the gaming sphere. With this, few competitors could rival MSFT’s arsenal, enriched further by access to ATVI’s renowned studios, including Treyarch and Infinity Ward.

Xbox head Phil Spencer has consistently championed a transformation of Xbox from a console-centric brand to a content-first platform, focusing on player engagement rather than console sales. The self-disruption philosophy is expected to be further cemented post-acquisition, fortifying the strategy to build a prolific portfolio of games and IPs.

This monumental acquisition could propel MSFT to become the third biggest gaming giant globally in revenue, trailing behind Tencent and Sony.

MSFT’s leap into the mobile gaming industry could experience a…

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