Microsoft announced a historic $69 billion deal to buy Activision Blizzard, the scandal-plagued “Call of Duty” developer, on Tuesday, betting big on the video game market’s prospects.
Microsoft will become the third-largest gaming firm by revenue, behind Tencent and Sony, after acquiring the struggling but extremely successful Activision, according to Microsoft, signalling a big shift in the burgeoning gaming market.
If the deal goes through, it will be the industry’s greatest acquisition, surpassing Take-$12.7 Two’s billion purchase of Zynga announced last week.
“Gaming is today’s most dynamic and exciting area in entertainment across all platforms,” Microsoft CEO Satya Nadella said, referring to the virtual reality vision for the internet’s future.
Employee protests, departures, and a state lawsuit saying it permitted toxic workplace conditions and sexual harassment against women have hurt Activision, the California-based producer of “Candy Crush.”
According to The Wall Street Journal, the corporation has received around 700 reports of employee concerns about sexual assault, harassment, or other wrongdoing in the last seven months. Separate complaints concerning the same incident have been received in certain circumstances.
A petition demanding for CEO Bobby Kotick’s resignation has been signed by over 20% of Activision Blizzard’s 9,500 employees.
According to the Wall Street Journal, Kotick will remain as CEO of Activision Blizzard after the purchase is completed.
The deal, which is expected to close in June 2023, is subject to usual closing conditions, regulatory approval, and Activision Blizzard shareholders’ approval.
After the announcement broke, Wedbush analysts said, “Acquiring Activision will help jump start Microsoft’s broader gaming ambitions and ultimately its entry into the metaverse, with gaming being the first monetization piece of the metaverse in our opinion.”
“With Activision’s stock under tremendous pressure (CEO-related issues/overhang) in recent months, Microsoft saw this as an opportunity to acquire a unique asset that can help it advance its consumer strategy.”
This would be the company’s largest acquisition ever, surpassing LinkedIn’s $26.2 billion acquisition in 2016.
According to Daniel Ahmad, an analyst at Niko Partners, “this is the largest acquisition in the games business to date.” “An acquisition of this magnitude demonstrates the global relevance of the gaming industry.”
Microsoft recently celebrated the 20th anniversary of the “Halo” video game franchise, which helped launch the Xbox system.
Xbox continues to be a major player in a video gaming business that is now estimated to be larger than the movie industry, with market research firm Mordor Intelligence estimating a value of $173.7 billion in 2020.
The industry is booming, with publisher Take-Two announcing a deal to buy “Farmville” developer Zynga for $12.7 billion last week as part of a huge mobile gaming push by the “Grand Theft Auto” creator.
Meanwhile, Activision has been embroiled in a sex harassment and discrimination scandal.
State authorities in California accused the corporation of allowing a harassing culture, a poisonous work environment, and inequity in July.
The US Securities and Exchange Commission opened an investigation into the company in September, citing “disclosures involving employment difficulties and associated issues.”
Two months later, the Journal reported that Kotick, who had been accused of mishandling the harassment accusations, had indicated that he would consider stepping down if the workplace culture could not be quickly fixed. He has been the CEO of Activision for over three decades.
Late last year, Activision’s chief operational officer Daniel Alegre promised a 50 percent growth in female and non-binary employees over the next five years, putting them at more than a third of the company’s workforce.
In his statement announcing the Activision agreement, Nadella mentioned safety and diversity.
He added, “We’re investing heavily in world-class content, community, and the cloud to usher in a new era of gaming that prioritises players and creators and makes gaming safe, inclusive, and accessible to all.”