Microsoft's ambition to acquire Blizzard: compete with Sony and invest heavily in the Metaverse!

On January 18, Microsoft announced that it would acquire gaming giant Activision Blizzard for $68.7 billion in an all-cash deal. This will be Microsoft's largest acquisition in history and will also rewrite the gaming industry's acquisition record.

After the acquisition, popular titles such as Call of Duty, World of Warcraft, Candy Crush Saga, Diablo, and Overwatch will enrich the Xbox Game Pass "arsenal", further helping Microsoft to form advantages in the entire industry chain in game consoles, production, distribution, and cloud computing. Microsoft will become the world's third largest game company after Tencent and Sony. As a result, Microsoft will form a "three-legged tripod" pattern in the game industry with Sony and Tencent.

At the same time, the acquisition of Activision Blizzard will greatly enrich the software giant's layout in the field of the Metaverse. Microsoft CEO Satya Nadella commented on the acquisition and bluntly stated that the deal will play a key role in the development of Microsoft's Metaverse platform:

“Gaming is the most dynamic and exciting category of entertainment across all platforms today, and will play a key role in the development of the Metaverse platform.”

Microsoft mentioned in an official statement that Activision Blizzard and Microsoft Games will continue to operate independently before the acquisition is officially completed. After the acquisition is completed, Activision Blizzard CEO Bobby Kotick will continue to stay in office and report to Microsoft Game Business CEO Phil Spencer.

It is worth mentioning that Mike Ybarra, CEO of Blizzard Entertainment, just joined Blizzard in 2019. Prior to that, he had worked for Microsoft for 22 years. Unexpectedly, less than two years later, his new company was acquired by his old company, which was rich and powerful. Ybarra had to passively return to his old company. For this, Ybarra himself said that he was "not sure whether to laugh or cry".

Microsoft's $68.7 billion offer is equivalent to $95 per share, a 45% premium to Activision Blizzard's closing price on the Friday before the deal was announced. However, in the long run, Activision Blizzard's stock price is still not high. Although the U.S. stock market has experienced a bull market in 2021, Activision Blizzard's stock price fell by more than 40% last year due to internal management chaos and turmoil in the past year.

The Metaverse Arms Race

In the long run, Microsoft's acquisition of Activision Blizzard is not only to intensify competition in the gaming field, but also to lay out its position in the metaverse.

After Zuckerberg changed Facebook's name to Meta last year, the "Metaverse" became a hot topic. The crazy enthusiasm also accelerated the development of this industry. As one of the most promising scenarios for the Metaverse in its early stages, major technology companies such as Microsoft, Blizzard, Nvidia, and NetEase have not been willing to lag behind and have announced large investments in research and development in the field of Metaverse.

Activision Blizzard is known for making games with metaverse components, where players spend hundreds of hours building communities in the game, which can be seen as the "prototype" of the current metaverse. For example, in the company's game "World of Warcraft" released as early as 2004, gamers complete tasks through online cooperation and enhance their "digital avatars" by collecting items such as weapons and armor.

Currently, Nadella and Spencer have already regarded the gamer communities that have grown around games such as Minecraft and Halo as a concept similar to the metaverse. After the completion of this acquisition, the various communities created by Activision Blizzard's 400 million monthly active users are expected to further enhance the competitiveness of Microsoft's metaverse strategy.

David Wagner, a stock analyst at Aptus Capital Advisors, said:

“This is a significant deal for consumers, but more importantly, Microsoft’s acquisition of Activision Blizzard really kicks off the Metaverse arms race.”

Competing with Sony

Since the launch of the first generation Xbox in 2001, Microsoft has been investing heavily in game consoles and game production over the past 20 years, and has successfully created a number of acclaimed game masterpieces such as Horizon, Halo, and Age of Empires.

After completing the acquisition of Activision Blizzard, Microsoft, which is "rich and powerful", is expected to be on par with Sony in terms of game consoles and game content. For players, the quality of the subsequent sequels such as Diablo IV and Overwatch II will also be more worth looking forward to.

Currently, consoles, content and cloud are the three cornerstones of Microsoft's gaming business. The number of users of Microsoft's cloud gaming business Game Pass has exceeded 25 million. According to market analysis company Newzoo, after the acquisition of Activision Blizzard, Microsoft's market share in the global gaming business will rise from 6.5% to 10.7%.