Microsoft and Meta must have a war: you suck my wool, I pound your old nest

Source of this article: Times Finance Author: Xu Dan

Image source: Visual China

The Meta-Cosmic War started between the giants.

On January 18, according to foreign media reports, Microsoft announced that it would acquire Activision Blizzard for $95 per share, with an all-cash transaction worth a total of $68.7 billion, which is also the largest acquisition in the history of gaming.

Microsoft said the acquisition would include iconic franchises for Activision, Blizzard and King Studios, such as Warcraft, Diablo, Overwatch, Call Of Duty and Candy Crush. as well as global esports events through Major League Gaming (North America's top esports federation).

After the acquisition, Microsoft will become the third largest game company in the world, after Tencent and Sony.

In addition to its ambitions in the game industry, Microsoft's acquisition also aims at a larger goal: the metacosm. Commenting on the acquisition, Microsoft CEO Satya Nadella bluntly said that the deal will play a key role in the development of Microsoft's metaversy platform: "Games are the most dynamic and exciting category of entertainment on all platforms today, and will also play a key role in the development of metaverse platforms." ”

Social giant Facebook also reinvented The Universe last year and announced that it would change its company name to Meta. The future "meta-universe giant" is still on the way to birth, but the competition has arrived in advance.

Gamers are ecstatic: even upgraded Windows 11

The $67.8 billion is more than double Activision Blizzard's previous highest acquisition offer and the largest acquisition in Microsoft's history. Previously, Microsoft's largest merger and acquisition was in 2016, which spent $27 billion to acquire linkedIn, a workplace social software.

Microsoft's acquisition has always been very large, and when it acquired LinkedIn, Microsoft's market value was only $400 billion, which was equivalent to 6.5% of the market value; when it planned to buy Yahoo in 2008, Microsoft's market value was about $260 billion, which meant exchanging 20% of the company's value for Yahoo.

Therefore, the "sky-high price" offered by this acquisition of Activision Blizzard is very much in line with Microsoft's "rich and powerful" style. And for Microsoft now, $67.8 billion is only 3% of the market value. According to foreign media reports, the funds on Microsoft's account are currently very sufficient, with a total of $130 billion in cash and equivalents, of which 85% exist as short-term investments.

With sufficient capital reserves, Microsoft and shareholders also hope to expand their business territory through acquisitions. Foreign media reported that due to the two successful acquisitions of LinkedIn and GitHub, Microsoft shareholders are optimistic about Nadella's investment ability, urging him to "have a bigger pattern and boldness in investment." ”

From a business perspective, a foreign analyst believes that Microsoft's current business direction is still enterprise-oriented, helping enterprises improve productivity levels is Microsoft's ultimate mission, when Microsoft considers business outside the core business will be more opportunistic, "the game business is proof." ”

Betting on the future of the meta-universe with acquisitions may be a manifestation of opportunism. But in any case, after this acquisition, the game's strategic position within Microsoft will also quickly increase.

As a console game manufacturer, Microsoft has always wanted to expand its mobile game business, and in 2012, it said that it would expand its business into page games and mobile games, and acquired "Minecraft" creator Mojang Studio and B Society. Its rival Sony in the gaming space is also pressing forward, publicly saying last year that it will transition its existing IP to mobile mobile games to supplement the company's shortcomings in the AAA game field.

The decision to acquire Activision Blizzard is also due to competitive pressure from the perspective of business layout. "In the traditional PC gaming space, Microsoft faces tremendous competitive pressure from Sony. If there is no new layout, it is likely to open up the gap with Sony. Gao Dongxu, founder and chief analyst of China Entertainment Think Tank, told Times Finance.

Is it a good time to acquire Activision Blizzard at this time?

The current Activision Blizzard is in a state of flux, and some industry insiders have questioned Microsoft's acquisition of an empty shell. Producers and designers of popular games such as "Overwatch" and "World of Warcraft" have left their jobs, and CEO Kotick is deeply involved in sexual harassment. The release of the games Diablo 4 and Overwatch 2 was delayed, while the new game Call of Duty: Vanguard was moderately evaluated. Activision Blizzard shares are already down 23% in 2021.

In Gao Dongxu's view, these are both challenges to Microsoft and acquisition opportunities. "The turmoil of the acquisition target is a good time to copy, but it will test Microsoft's management ability, after all, Microsoft's corporate culture is more conservative, and Activision Blizzard is a more creative company."

Even if the business is in a trough, Activision Blizzard's games still have a strong IP effect and a large number of loyal users, so far, Activision Blizzard still has 400 million monthly active players. If Microsoft can revitalize it, it may be able to bring it back to glory.

On the afternoon of the 19th, Reuters quoted sources as saying that Activision Blizzard CEO Kotick intends to leave after the acquisition, which is a positive signal for both sides of the acquisition.

A veteran "Overwatch" player told Times Finance that Activision Blizzard's "Warcraft" and "Overwatch" and other games still have a large number of loyal fans, but only because of the unfavorable operation in the past two years, many players have been lost. "The acquisition by Microsoft, the gamers are ecstatic, and everyone is waiting for the emergence of Overwatch 2, looking forward to its return to the glory of 2016. I don't think it's necessary to get back to the top, but it certainly won't be worse than it is now. ”

On social platforms, some gamers said, "So happy, for Microsoft, I'm upgrading Windows 11." ”

In addition to Blizzard's own IP, the above-mentioned foreign analysts said that the Microsoft acquisition may also want to add users to Game Pass. "If it stimulates the development of Game Pass, such as increasing the number of paid subscribers from 25 million to 50 million, the acquisition will undoubtedly make sense."

Microsoft and Meta must have a war

Of course, Microsoft's bigger bet is in the metacosm.

On a post-acquisition conference call, Nadella made no secret of his expectations for the metaverse and proposed Microsoft's own understanding of the metacosm: the elimination of the boundaries between games and players. "We see the metaverse as a collection of communities and individual identities that can access world-class content on any device."

Simply understood, Nadella's imagination of the metaverse is similar to a game platform like Roblox. The entrance to the platform is Microsoft's Xbox Game Pass digital subscription service, through cloud technology, Microsoft will synchronize Activision Blizzard and other acquired games to PCs, hosts, mobile devices in the future, and users can access all of Microsoft's games on multiple ports through one microsoft account.

"In the future, when Game Pass is able to stream Overwatch or Diablo to anyone who owns a phone, you'll understand how exciting the acquisition will be." Nadella said.

In the metaverse world built by Microsoft, game publishers will no longer exist, and Nadella also expressed his dissatisfaction with game publishers at the conference, feeling that "publishers earn more than game creators." Microsoft's vision is to create a "river of entertainment where content and commerce flow freely." ”

In the metaverse field, Microsoft's biggest competitor is Meta, and the competition between the two has begun long before the official announcements enter the metaverse.

Last November, Facebook changed its company name to "Meta" and announced "All in Metacosm.". Facebook's entry into the metaverse is focused on hardware, hoping to create virtual spaces through devices such as VR/AR/MR.

To this end, Facebook has recruited a wide range of talents in the industry. In January last year, foreign media quoted Microsoft's former company information as saying that Microsoft's augmented reality (AR) team had lost about 100 people in the past year, many of whom were poached by Facebook's parent company Meta. "Competitors have been poaching employees with experience developing Microsoft's HoloLens AR headsets, sometimes offering double salaries."

In March, another foreign media outlet reported. Facebook has nearly 10,000 employees working on AR/VR devices, accounting for 1/5 of the world's workforce.

Microsoft has proposed a metaverse view that is in direct opposition to Meta. As with its views in the gaming industry, Microsoft believes that the key to the metaverse is also the elimination of connections and boundaries. "All explorations and experiments around the metaverse should not try to recreate a metaverse, but should realize the infinite and real-time flow and exchange of prices and information between the virtual two realms, and realize the elimination of boundaries."

However, the exploration of both is still in the early stages, in addition to the acquisition of Activision Blizzard, Microsoft's biggest progress in the meta-universe is to introduce 3D avatars into Microsoft's collaborative office software Teams.

Meta's metaverse, on the other hand, is ambitious but unfavorable. In January this year, foreign media reported that Meta had stopped developing the XROS operating system in November 2021, and the core personnel was poached by Google. Previously, Meta also tried to recruit Apple engineers but was counterattacked by the other side: Apple temporarily issued a large bonus, up to $180,000.