As an Amazon Associate I earn from qualifying purchases

What Xbox will likely do with its $68B purchase of Activision Blizzard King


What Xbox will likely do with its $68B purchase of Activision Blizzard King

Aurich Lawson

You might have heard the news: Microsoft has announced plans to acquire gaming behemoth Activision Blizzard King (ABK) and its subsidiary development studios. The deal is valued at $68.7 billion—or roughly 17 acquisitions of the Star Wars franchise—and that kind of money isn’t spent without an expectation of major moves (and revenue) going forward.

After my colleague Kyle Orland chronicled everything we know thus far about the deal, I wanted to take a deeper look at the shape these combined companies (and their expected game launches) may take going forward.

Game Pass must be fed

The best sellers in the console industry continue to be holiday-adjacent releases, and Activision has a long track record of topping holiday sales charts. But Microsoft has been bullish about its Xbox brand growing not because of console sales and gifts under Christmas trees but because of the bigger profits possible when fans subscribe to Xbox services and spend money on the Xbox brand every month, primarily via Xbox Game Pass. In that business model, subscriber numbers are what matter, not breakout first-party games or console sales.

Newly appointed Xbox CEO Phil Spencer has alluded to this market reality when discussing previous Xbox studio acquisitions, particularly Bethesda’s diverse gaming portfolio. As he said in a June 2021 presentation:

We simply put more top-quality games in front of more people than other companies. Across the Xbox ecosystem, we’re now reaching hundreds of millions of people every month. Our total addressable market is going to grow, while others are relatively static. As the Xbox ecosystem grows in both content and total size, it becomes more available to both players and our partners. Right now, we’re the only platform shipping games on console, PC, and cloud simultaneously.

In a Tuesday interview with GamesBeat, ABK CEO Bobby Kotick echoed this sentiment. He never mentioned Xbox Game Pass, but he did describe ABK’s growth potential challenges. This might be the first time he has done so in a public forum; during calls with investors, he has been more inclined to trumpet ABK’s quarterly growth.

Kotick described a massive potential business pivot for ABK: hiring “thousands” in sectors like artificial intelligence, data analytics, and “purpose-built cloud” capacities. This description could be a red herring—an ABK sale would rescue the company from its worst PR crisis in years, no matter what Kotick says. On the other hand, Kotick’s statement certainly suggests that ABK saw the writing on the wall for business as usual, at least the business of making megaton retail games for PC and console.

This is likely why Kotick said merging with another multi-console game publisher is a bad fit for Activision’s future:

You’d think, oh, we’re this big company and have just these great resources. But when you’re comparing us to, you know, $2 trillion companies and $3 trillion companies… you realize, we may have been a big company in video gaming, but now, when you look at the landscape of who the competitors are, it’s a different world today than ever before. I think [Take Two CEO] Strauss [Zelnick] did a good deal with things because I think he realized he needed mobile [in acquiring Zynga]. But I think that even if we were to have consolidated within EA, that wouldn’t have given us what we’re going to need going forward.

As Kotick tells it, ABK had the option to either build an entirely new business model or get out while the getting was good. And Kotick pointed out that Microsoft’s bid for ABK stock was a cool 45 percent above market value—which implies (but does not confirm) that Microsoft had to put a competitive offer on the table for one reason or another. Microsoft has all of the infrastructure that Kotick referenced in his interview; the company just needs the megaton exclusive games (and, if Spencer gets his way, at least one biggie “every quarter”).



Source link

We will be happy to hear your thoughts

Leave a reply

Cozyappliance
Logo
Enable registration in settings - general
Compare items
  • Total (0)
Compare
0
Shopping cart