The Upside and Downsides to Microsoft Buying Activision and Blizzard.
Microsoft, the makers of the Xbox, has bought Activision and Blizzard for a whopping $68.7 billion, and where this may have caused concern in 2020, it is perhaps not as worrying in 2022.
That is mostly because Activision and Blizzard have had a little trouble recently, and having a whale-like Microsoft swoop in and offer senior management some very tasty goodbye bonuses is probably a dream come true for the Activision Blizzard senior management and primary shareholders. But, what does this massive acquisition offer gamers? Is this a good thing or a bad thing?
That’s a Lot of Money
To put it in perspective, if you were to rank every country by its GDP, be aware that the last 70 of them don’t make over $70 billion in GDP per year. This purchase is massive, and that is a problem because the purchase was made because of its timing and not because of a strategy.
Microsoft doesn't have a place for Activision or Blizzard in its future plans. The Xbox directors have tried to re-prioritize gaming again after the Playstation 4 “Schooled” them on how to be a video games console. But, the Activision Blizzard route was never on their road map.
Microsoft’s purchase of these companies is because lots of senior and primary shareholders want to jump ship and are now happy to sell. All of this is because Blizzard and Activision have had a little trouble recently.
Blizzard and Activision’s Troubles
Bobby Kotick, the leader of Activision Blizzard is only too happy to stay on with the company, but only until the merger is complete in 2023. Why would such a senior and celebrated businessperson be so willing to cash out and retire with just $400 million to keep him warm at night?
Everybody hates Activision Blizzard, and the only people who don't hate Activision Blizzard are the people who have no idea what these companies have been up to. The company's reputation, image, and working conditions are in the toilet. They created COD Vanguard and pretty-much spat in the faces of their fans considering how bad it was. The number of sexual harassment claims against the company has led many to believe there is no smoke without fire. Especially since the ME2 trend has passed, women are still coming after Activision Blizzard.
The problem is that when people leave the job, they are still under NDA agreements, which means they can’t blab to news outlets and social media about their horrible time at Activision Blizzard and why they left. But, there are documented lists of complaints from people, anonymous and otherwise, showing a pretty serious problem with the corporate culture at Activision Blizzard.
It Is A Poor Investment Overall
The amount of money paid for this purchase is massive, and that is part of the reason why it is a poor investment overall. Despite the troubles that Activision Blizzard have had, their Call of Duty games are still making over one billion dollars per quarter, and that is despite their yearly schedule turning a once-beloved game into a shell of its former self.
That is not in the selling of games that were expensive to make, that is from selling microtransactions, which is a way of charging people for giving them something digital that only exists in the game. To put that in perspective, FFXIV has 35.8 million active users and made $2.4 billion in a year, most of which didn't come from FFXIV Gil purchases. COD is making 50% more than FFXIV on just microtransactions alone.
It is the closest our society has come to printing money and Call of Duty is doing it with ease. Candy Crush made over $1 billion in revenue at its peak in 2014, and these numbers that are the reason why Activision Blizzard were able to smash their online reputation and still ask for almost $70 billion.
The cost makes it a poor investment because it is going to take years for Microsoft to recoup their money and start turning a profit, and anything could happen between now and then. Microsoft doesn't have the infrastructure to support all of these new staff, new working methods, new technology, and new IPs.
Microsoft will have to focus on the big-hitting names, leaving many beloved-but-niche IPs in storage. Make no mistake, some of the people who are taking control of Activision Blizzard are not bad people. They have kept Overwatch alive and kept Minecraft popular. The new people in charge are not novices, but they are taking on a lot without having time to prepare.
To give you an idea, Microsoft is now going to control Call of Duty, Crash Bandicoot, Guitar Hero, Tony Hawk's, Spyro, Skylanders, World of Warcraft, StarCraft, Diablo, Hearthstone, Heroes of the Storm, Overwatch, and Candy Crush Saga. These are massive games with massive followings, but with great followings comes great danger.
How To Spend $4.1 Billion and Make it Worthless
George Lucas sold Star Wars for $4.1 billion, and Disney took the IP, made three of the worst space movies in history, spend $900 million, and made back a fair profit. In the process, they alienated every Star Wars fan so that their subsequent Star Wars movies and TV shows started to show very slim profits.
In fact, if Disney wants to make back its $4.1 billion, it is going to have to make ten years of movies and games because the profits on Rogue One were passable, but the profits on “Solo: A Star Wars Story” were almost break even. In fact, they probably were break even if you count the money that goes missing to help push up Rotten Tomatoes and Google review scores.
Microsoft now has their hands on a lot of very popular game franchises, and it is very easy for them to grind them up for a big profit and then ruin them forever (like what happened with Star Wars). Microsoft could go the EA route and start pumping out cookie-cutter sequels for easy money. But, there is one thing that Microsoft could do that would spell Xbox’s doom in ten years.
The Biggest Mistake Microsoft Could Make
Playstation 4 won the console wars against the Xbox One. The Xbox was overpriced, it was trying to focus on home media rather than gaming, you needed the motion control device (whether you wanted it or not), you couldn’t share games, and you needed to connect to the Internet in order to play your games because Microsoft’s DRM demanded it.
The final nail in the coffin was Microsoft’s attitude towards the people who dare complain that their beloved games console sucks.
When questioned about what people should do if they cannot connect to the Internet, they replied with: “Microsoft Says If You Don't Have Internet: Get Xbox 360, Not Xbox One.” In other words, if you don't like the idea of having your Internet always on when you play the Xbox One, then “Screw You” is what they were saying.
Even if we forget the fact that there are many times people cannot connect to the Internet, for a multitude of legitimate reasons, you have to understand how people feel being spoken down to in such a manner. Xbox handed the console victory to Playstation 4 in glorious fashion.
Since then, gaming has become a lot friendlier. There are far fewer exclusives, online arguments about which console is best have almost disappeared, and the best thing of all is that games can be played cross-platform. In other words, if you want to play Divinity Original Sin 2 on your PC, you can still play with your friends even if they are playing on Xbox and Playstation.
It is a golden age where developers are the Satans (Activision Blizzard, EA, Bungie, etc.) and saviors (FromSoft, Poncle, Kojima, ID Software, Square Enix, etc.). We live in a golden age of gaming, and Microsoft could cause a massive mess by making their IPs exclusive.
How Exclusive Games “Now” Would Butcher Gaming
If Microsoft makes its popular IP franchises exclusive to the PC and Xbox, then they are going to make a lot of money, but they are also going to restart the console wars. At the moment, Xbox and Playstation are suckling from the same teats. Even people who don't own an Xbox are still playing its games through their PC, all while happily owning a Playstation 5.
Microsoft stands to make a lot of money if they make their new Activision Blizzard games exclusive, but they will restart the console wars, they will split their audience, and they will create a backlash developer explosion.
With major titles now going missing from Sony’s library, developers are going to rush to become the next big thing on the Playstation, and investors are going to back them. We are going to have lots of developers appearing on the scene, and some of them are going to create breakout successes. Suddenly, we are back to the Sega Nintendo years where you can only play Mario on Nintendo and Sonic on Sega.
If Microsoft is smart, they will take their time in making new games for their newly acquired Activision Blizzard IPs, and they will do what Activision Blizzard were doing previously by sharing those games across as many devices as possible. Microsoft will still make their money back without damaging the gaming industry as a whole. Plus, Microsoft has a habit of losing console wars.
If they start a new one, they are setting themselves up for another failure in the future. If Microsoft plays the long game, if they maintain modern developers’ accessibility and cross-console gaming culture, then Microsoft’s purchase of Activision Blizzard could end up paying dividends for decades.