The New Video Game Industry?: What would it look like when Microsoft purchased Activation Blizzard?
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In 1979, a group of disgruntled Atari workers decided to depart and start their own company. Activision was the first “third-party” game developer in the world, designing and publishing games for other companies’ platforms. Fast forward 43 years, and Microsoft, one of the industry’s major platform owners, has purchased Activision Blizzard for a whopping US$68.7 billion (roughly A$95.6 billion) – the largest sale in the video game industry’s history.
This deal is particularly noteworthy in terms of Microsoft’s current game properties; the company now owns blockbuster brands such as Call of Duty, Diablo, Starcraft, Candy Crush, and World of Warcraft. And tens of millions of fans will be curious about the implications of this change in ownership. Multibillion-dollar purchases are nothing new in the video game industry. When Activision and Blizzard merged in 2008 in a US$18.9 billion deal, Activision Blizzard became one of the top video game companies. Microsoft and Sony frequently acquire well-known pre-existing development studios in order to seize control of their intellectual properties (IP) and make them exclusive to their respective platforms.
Multibillion-dollar purchases are nothing new in the video game industry. When Activision and Blizzard merged in 2008 in a US$18.9 billion deal, Activision Blizzard became one of the top video game companies. Microsoft and Sony frequently acquire well-known pre-existing development studios in order to seize control of their intellectual properties (IP) and make them exclusive to their respective platforms. Microsoft, on the other hand, has taken a hard line. It has made a number of high-profile acquisitions over the last decade, including Minecraft developer Mojang for $2.5 billion in 2014 and Elder Scrolls and Doom publisher ZeniMax for $7.5 billion in 2020. Microsoft has surpassed TenCent and Sony as the industry’s third-largest firm with the acquisition of Activision Blizzard.
All of this is part of Microsoft’s current video game business strategy, which focuses on increasing subscriptions to its Game Pass service rather than selling games. Game Pass, similar to Netflix and Spotify, provides customers with access to a large digital library of games in exchange for a monthly fee. In its announcement of the Activision Blizzard acquisition, Microsoft boasted that Game Pass had surpassed 25 million subscribers. With each subscriber paying US$16 per month, total monthly revenue is nearly US$400 million (or A$556 million). Microsoft now has access to a large number of new properties that it may make available through Game Pass, potentially enticing even more users, thanks to its acquisition of Activision Blizzard.
Microsoft could make these properties exclusive to Game Pass if it wanted to, driving customers away from competing systems like PlayStation and distribution sites like Steam. To put it another way, it has the potential to draw customers into its own private environment. This is currently a widely used method. We have all become renters rather than owners of product as a result of subscription-based digital platforms. Individual video games are no exception. Call of Duty, Hearthstone, and Fortnite (among many others) are no longer single-player games, but rather ecosystems in which players are encouraged to spend money on battle passes, cosmetics, and access to new content on a regular basis. Meanwhile, the companies that own these games can constantly harvest new data from their millions of players, enhancing the value of their businesses.
