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Microsoft announced its intent to acquire Activision Blizzard on January 18th, 2022, the maker of incredibly popular games such as Call of Duty, Candy Crush, and World of Warcraft.
However, their ambitions were kept in check due to concerns that the acquisition may lead to anti-competition issues in the gaming industry. Nevertheless, the video game giant received the green light and has added Activision Blizzard games to its collection.
A less widely known fact is that, before acquiring Activision Blizzard, Microsoft already owned many popular video game companies, including:
This consolidation strategy has raised anti-trust alarms. The question that weighed on the minds of regulators and competitors is whether Microsoft is forging a gaming monopoly and, if so, whether it aims to achieve this by designating its games exclusive to Xbox consoles or the Xbox Game Pass.
As it stands, this acquisition will make it the one of the largest gaming companies in the world by revenue. With this kind of market authority, governments from across the globe have questioned the intended acquisition.
Microsoft and Activision Blizzard are both US-based companies; however, without approval for the acquisition in all countries where Activision Blizzard's games are sold, revenue would decline significantly. That said, Microsoft has secured approval from various antitrust authorities spanning over 40 countries.
In December 2022, the Federal Trade Commission (FTC) prevented the deal with a lawsuit. It claimed that Microsoft may harm competition in the console and subscription-based services markets. Lina Khan, chairperson of the FTC, has adopted a strong stance on these major deals in an effort to prevent unfair competition.
Affirming their initial apprehensions, the FTC pressed forward with a restraining order in June 2023 to forestall the merger while their initial legal case unfolded. Nevertheless, the District Court in the Northern District of California, after five days of testimony, dismissed this request.
Along with the FTC, in April 2023, the UK's Competition and Markets Authority (CMA) prevented the deal. It was concerned about this acquisition's potential consequences on the cloud gaming market.
Like a chorus of voices echoing through the halls of power, the FTC and CMA raised their concerns as a symphony of caution, preventing the merger from becoming the unintended crescendo of monopoly in the gaming industry.
But they weren't the only ones to hold the deal in contention. Sony was among the concerned parties who had reservations. As Microsoft's biggest competitor in gaming consoles, it needed to ensure that Microsoft would maintain all of its IPs on PlayStation.
Sony is right to have its concerns, with Microsoft’s Game Pass subscription service increasing in subscribers year-after-year. In fact, the Japanese multinational conglomerate has its own subscription service, the Playstation Plus, for which it competes for market share with Xbox.
In light of these objections, how was Microsoft able to close what is now the most significant gaming deal in history? First, Microsoft signed a 10-year agreement with Sony stating that it would keep Call of Duty on PlayStation, proceeding the acquisition.
The Windows developer also restructured its original deal with the CMA. Microsoft stated that the updated deal “presents a substantially different transaction under UK law than the transaction submitted to the CMA in 2022.”
The agreement was inclusive of an agreement to transfer cloud gaming rights to Activision Blizzard games on console and PC for 15 years.
After a review in September 2023, the CMA stated it intended to approve the deal. And on October 13th, 2023, the door was unlocked for Microsoft to be the new home of Activision Games and the popular Call of Duty franchise.
CEO Bobby Kotick will be stepping down after a 32-year-long career with the company. However, the acquisition by Microsoft Gaming was not the only reason for doing so.
The long-standing Activision Blizzard CEO has been entangled in controversy ever since, back in July 2021, the state of California sued the company for allegedly having a culture of "constant sexual harassment." This included accusations of unseemly comments and even inappropriate touching.
The lawsuit claimed that top executives were not only aware of the issue but also involved in it. Kotick assured he was not aware of the problem. He also stated that the company has never had a “systematic issue with harassment.”
Back in November 2021, a week before the lawsuit, over 100 employees staged a walkout to demand the CEO be replaced. They also started a petition in November 2021, which accrued over 1,800 signatures.
While some may speculate that this was due to a desire for a change in management owing to the acquisition, official statements all relate to the CEO’s alleged apathy regarding sexual misconduct claims.
Microsoft has published that: “This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.”
So the future clearly involves ingenuity in the VR realm — but time will tell.
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Joshua J. Brouard brings a rich and varied background to his writing endeavors. With a bachelor of commerce degree and a major in law, he possesses an affinity for tackling business-related challenges. His first writing position at a startup proved instrumental in cultivating his robust business acumen, given his integral role in steering the company's expansion. Complementing this is his extensive track record of producing content across diverse domains for various digital marketing agencies.
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