"A river of entertainment" Microsoft's record $68.7 billion gaming buyout

Microsoft has agreed to buy gaming giant Activision Blizzard for $68.7 billion. The deal, announced January 18, will make Redmond the world's third biggest gaming company by revenue, after Tencent and Sony.

Activision Blizzard, headquartered in Santa Monica, California, has some 10,000 employees globally and has published some of the world's most widely played games including Call of Duty, Candy Crush and Overwatch.

The deal is Microsoft's largest ever. It comes as Redmond anticipates that the $200+ billion gaming industry will reach 4.5 billion consumers by 2030; it is already the world's fastest growing form of entertainment.

Analysts were quick to position the deal as a major play for the nascent "metaverse". Microsoft looked from The Stack's view to be more focussed on the huge potential for its cloud-to-mobile game streaming platform.

There are well over six billion smartphones registered globally. Microsoft already has cloud gaming services available in 26 countries, with games streamed from customised hardware in its Azure data centres.

Microsoft CEO Satya Nadella said on investor call: "Critically, this transaction significantly expands our presence in mobile, the largest segment in gaming business" adding "through the cloud, we’re extending the Xbox ecosystem... including in global markets where traditional PC and console gaming has long been a challenge. And when we look ahead and consider new possibilities, like offering Overwatch or Diablo, via streaming to anyone with a phone as part of Game Pass, you start to understand how exciting this acquisition will be."

Nadella added on the investor call today: "Too much friction still exists today between content, consumption and commerce. We need to make it easier for people to connect and play great games, wherever, whenever and however they want. Today, we face strong global competition from companies that generate more revenue from game distribution than we do from our share of game sales and subscriptions.

"We need more innovation and investment in content creation and fewer constraints on distribution.

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Raman Abrol, CEO at Vubiquity and GM at Amdocs Media said in an emailed comment: "The acquisition of Activision Blizzard by Microsoft is another example of companies upping the ante in a bid to attract new and existing subscribers, as well as strengthening their plays in preparation for the metaverse, which gaming is sure to play a critical role. According to our research, gaming has shown a dramatic increase during the pandemic, with 49% of those polled saying they are playing more than before it. While the industry saw an increase in streaming and gaming subscriptions during the pandemic, 2022 will be about retaining these new users through notable acquisitions, hardware like HoloLens, the expansion on existing IP and dedication to compelling originals.

Forrester VP Mike Proulx said: "This is yet another play by Microsoft to secure its stake in the nascent metaverse. The company previously announced it’s vision for a metaverse tech stack back in May.

"The acquisition of Activision Blizzard gives the company a 3D gaming experience layer that complements their XBOX gaming hardware. What this means is that Microsoft is now holding a number of important cards in the developing metaverse: back-end infrastructure, devices, and now an experience platform," he added.

Nadella's own view?"When we think about our vision for what a metaverse can be, we believe there won’t be a single, centralized metaverse and there shouldn’t be. We need to support many metaverse platforms, as well as a robust ecosystem of content, commerce and applications. In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises, accessible on every device."

Microsoft has long been bullish on Xbox Game Streaming, which lets you pick a game then spins up instances in Azure to beam gameplay to an internet-connected device of your choice. The company in June 2021 said it was in the "final stages of updating our Microsoft datacenters around the world", adding Xbox Series X hardware to its DCs to improve load times, frame rates and overall game streaming experience.