Microsoft Corp Acquires Activision Blizzard, Highway Towards Metaverse World

JAKARTA – Microsoft Corp bought the game maker "Call of Duty", Activision Blizzard, for 68.7 billion US dollars (IDR 986 trillion), which became the biggest game industry deal in history. This comes as the global tech giants stake their claim to being the rulers of the virtual future.

The cash deal announced by Microsoft on Tuesday, January 18 is the biggest acquisition the gaming world has ever seen. The acquisition will increase its firepower in the booming video gaming market, currently dominated by leaders, Tencent and Sony.

It also represents the United States' multinational gamble on the "metaverse," a virtual online world where people can work, play and socialize, as many of its biggest competitors already do.

"Games are the most dynamic and engaging category of entertainment across all platforms today and will play a key role in the development of the platform metaverse," said Microsoft Chief Executive Satya Nadella, as quoted by Reuters.

Microsoft's offer of $95 per share represents a 45% premium to Activision's closing stock last Friday. Activision's stock at that time was at 83.35 US dollars per share in early trading.

The deal comes at a time when Activision, the maker of games like "Overwatch" and "Candy Crush", is in limbo. Its stock has slumped more than 37% since hitting a record high last year, as it was hit by allegations of sexual harassment of employees and indecent behavior by some top managers. Uniquely at Microsoft, also experienced similar accusations. Fit!

The company is still working on the allegations and said on Monday, January 17, that it had fired or dismissed more than three dozen employees and disciplined 40 others since last July.

Activision CEO Bobby Kotick, who said Microsoft has reached out to them for a possible purchase, and he will continue to be Activision CEO after the deal happens.

In a conference with analysts, Microsoft boss Nadella did not directly refer to the scandal but spoke about the importance of culture in their company.

"It is imperative for Activision Blizzard to push for a renewed cultural commitment," he said, adding "the success of this acquisition will depend on it."

The global gaming market is worth US$173.70 billion (IDR 2.4 quadrillion) in 2021, and is expected to reach US$314.40 billion (IDR 4.5 quadrillion) by 2027, according to research firm Mordor Intelligence. This is certainly a very tempting “big cake” for tech giants like Microsoft.

Microsoft can already claim a significant foothold in the gaming world as one of the top three console makers. It has made major investments including "Minecraft" makers Mojang Studios and Zenimax in multi-billion dollar deals in recent years. It has also launched a popular cloud gaming service, which has more than 25 million subscribers.

Executives spoke of Activision's 400 million monthly active users as one of the main highlights of the deal and how important it is for this community to be able to play in Microsoft's future metaverse games.

Activision's game library could give Microsoft's Xbox gaming platform an edge over Sony's Playstation, which for years enjoyed a more stable stream of exclusive games.

"People like Netflix have said they want to dive into gaming themselves, but Microsoft has come out with a rather generous offer today, which would make Microsoft the third-largest gaming company in the world," said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

Tech companies from Microsoft to Nvidia have been placing big bets on the so-called metaverse, with rumors surrounding it rising late last year after Facebook changed its name to Meta Platform to reflect its focus on its virtual reality business.

"This is a significant deal for the consumer side of the business and more importantly, Microsoft's acquisition of Activision is really starting an "arms race" in the metaverse," said David Wagner, Equity Analyst and Portfolio Manager at Aptus Capital Advisors.

"We believe the deal will be done," he said, but he also warned that it would receive a lot of scrutiny from a regulatory point of view.

According to Andre Barlow of law firm Doyle, Barlow & Mazard PLLC, lawmakers on Capitol Hill, who are considering a long list of antitrust laws aimed at curbing Big Tech companies like Google and Facebook, would be skeptical of this transaction. "Microsoft is already big on the game," said Barlow.