Microsoft's $68.7 billion acquisition of the game giant, to enter the meta-universe and reshape the game industry?

According to foreign media reports, Microsoft announced on the 18th that it will acquire Us video game giant Activision Blizzard for $68.7 billion. If the deal is reached, it will be the largest acquisition in the history of the game industry. This move marks Microsoft's ambition to enter the metaverse and may rewrite the pattern of the global game industry.

Largest acquisition

Microsoft issued a statement on the 18th that it will acquire Activision Blizzard in full cash at a price of $95 per share, including Activision Blizzard's net cash, with a transaction value of $68.7 billion.

Microsoft said the acquisition is still pending approval by Activision Blizzard shareholders and regulators. If all goes well, Activision Blizzard is expected to be included in Microsoft in fiscal 2023 (starting in the fourth quarter of 2022).

According to foreign media reports, if the deal is concluded, it will not only be the largest acquisition transaction ever made by Microsoft, but also the game industry, and it will also be the highest all-cash transaction on record. Microsoft's biggest previous acquisition was in 2016, when it bought LinkedIn for $26.2 billion.

Still, for Microsoft, which has a market capitalization of $2.3 trillion, the acquisition is only 3% of its market value.

According to Bloomberg, according to Activision Blizzard's closing price on Friday, the premium for the acquisition is as high as 45%. Affected by the news, Microsoft closed down about 2.4% on Tuesday, and Activision Blizzard soared 26%.

It is understood that Activision Blizzard is an American game production and publishing company, formed by the merger of Activision and Vivendi Games in 2007, and is now one of the giants of the global game industry, and has developed game masterpieces such as "Call of Duty" and "Guitar Hero".

According to the data, Activision Blizzard and its subsidiaries have more than 720 invention patents, mainly focusing on video games, virtual worlds, interactive, virtual reality and other technical fields, of which more than 560 patents are related to the metaverse. Industry insiders pointed out that to some extent, the gamer community created by Activision Blizzard is similar to the "prototype" of the metaverse.

Once the acquisition is struck, Microsoft Gaming CEO Phil Spencer will take over Activision Blizzard, and the two will continue to operate independently. Activision Blizzard CEO Bobby Kotick will remain CEO, but will be required to report to Spencer.

What are your considerations?

Why is Microsoft making such a big move? Based on the analysis of all parties, there are the following reasons:

First, enhance its position in the game industry. Once the acquisition is made, Microsoft will become the third-largest global game company by revenue, behind Sony and Tencent. Microsoft said the acquisition will accelerate the growth of Microsoft's gaming business in mobile, personal computers, consoles and cloud businesses.

In recent years, gaming has become one of Microsoft's key development areas. Especially under the new crown epidemic, people's demand for games has accelerated the development of the industry. In January 2021, thanks to the rise of its blockbuster game brand Xbox, Microsoft's game revenue exceeded $5 billion for the first time.

After taking the hand to see Blizzard, it will bring nearly 400 million monthly active users to Microsoft, game studios and nearly 10,000 employees around the world, and a number of blockbuster game IP.

Second, borrow the game port to lay out the metaverse. Many media have mentioned that this move represents Microsoft's official bet on the meta-universe.

Since Facebook changed its name to "Yuan" in October last year, this virtual world that integrates work, entertainment, social networking and other functions has attracted many corporate giants and brands, including Microsoft's main competitors.

Microsoft CEO Satya Nadella bluntly said, "Gaming is the most dynamic and exciting part of entertainment capabilities of all platforms today and will play a key role in the development of the metaverse."

The industry believes that combining Microsoft's cloud gaming and Activision Blizzard's player community may help Microsoft create a larger gaming community, thereby enhancing the competitiveness of its meta-universe strategy.

Third, enhance the consumer technology field. Analysts say acquisitions can provide attractive strategic value, especially in Microsoft's relatively weak consumer technology space, where games and advertising could bring Microsoft $1 trillion in market share over the long term.

In addition, the acquisition is also a good thing for Activision Blizzard. In the ever-changing competition in the game industry, it is not wise to fight alone, and "back to the tree" has become the choice of many game companies.

Activision Blizzard CEO recently said in a letter to all employees that the meta-cosmology of the game is the main reason for accepting the Acquisition of Microsoft, "We need a partner to achieve our dreams and ambitions."

Rewriting the landscape?

Industry analysts believe that this is not only a huge deal, but more importantly, this acquisition may exacerbate the "arms race" of the meta-universe and rewrite the game industry pattern.

The track is already crowded with the industry widely viewing metaversity as the next flashpoint in the tech industry. It is understood that Facebook (yuan), Google, Tencent, Amazon, Apple, Sony and other companies have launched their own meta-universe plans, and games are becoming a major breakthrough.

Dan Ives, an analyst at Wadebush Securities, explained that this is because games are considered the first way to monetize in the metaverse.

Industry insiders pointed out that compared to Facebook's advantages in the social field, Microsoft is more prominent in technology and innovation. As games develop into the metaverse, they need technical support such as cloud computing, artificial intelligence, machine learning, and data analysis, and Microsoft is expected to open up the situation from the game.

The US financial media "Barron's Weekly" is optimistic about the acquisition, believing that it will make Microsoft the "master of the metacosm".

There are also some views that after the completion of the acquisition, the global game industry may form a "three-legged" pattern of Sony, Tencent and Microsoft. At present, the power of this "bomb" has been revealed. As soon as the news of the acquisition came out, shares of old rival Sony plummeted 9.6%, the biggest drop since March 2020.

The analysis pointed out that after the acquisition, Microsoft is expected to far surpass Sony in the production of game content. Activision Blizzard's "Call of Duty", "World of Warcraft", "Overwatch" and other popular works can enrich the resource library of Microsoft's cloud game business Xbox Game Pass, thereby helping Microsoft form a whole industry chain advantage of game console, production, distribution and cloud business.

At the same time, the acquisition will also help solve Microsoft's problems in the mobile game market and game fees. At present, Microsoft has almost no achievements in the field of mobile games, and the explosive mobile game "Candy Legend" produced by Activision Blizzard is acclaimed and popular, or paves the way for Microsoft to enter the mobile game. If Microsoft's gaming empire is strong enough, it is possible to bypass the Apple App Store, and the two sides are currently fighting over the App Store's charge for games.

Market analyst firm Newzoo expects Microsoft's market share in the global gaming business to rise from 6.5 percent in 2020 to 10.7 percent after the acquisition of Activision Blizzard.

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