Warcraft, Interstellar, And Overwatch are the youth memories of countless post-80s and post-90s generations, and the developer behind it, Activision Blizzard, is the world's top game company.
On January 18, Beijing time, the heavy news of "Blizzard selling itself to Microsoft" exploded at home and abroad, and the "selling fee" was as high as 68.7 billion US dollars. This shook the global gaming industry violently, and the next day (19th) rival Sony recorded its biggest decline since September 2014 in the Tokyo stock market.
"Grandpa Knot!" Countless netizens sighed.
After the announcement of the official announcement, the topic #Microsoft announced the acquisition of Activision Blizzard # rushed to Weibo hot search, netizens were shocked by Microsoft's "banknote ability": "The most terrifying is the all-cash transaction", "400 billion, say cash will be paid in cash", "three or four hundred billion, said that the acquisition is acquired... Microsoft is indeed a big guy..."
At the end of September last year, I wrote an article titled "A Generation of Legendary Blizzards Is Troubled Inside and Outside, When Will the "Fire" of Azeroth Be Ignited Again?" At that time, Blizzard's management was deeply involved in a scandal, and the performance and stock price fell one after another, but after a few months, they turned around and signed a sky-high "deed of sale" with Microsoft.
If the merger is successful, can Microsoft rekindle the "war on Azeroth"? What does Microsoft value about Blizzard?
Microsoft's "big deal" mergers and acquisitions
According to an announcement released by Microsoft (MSFT.O) on January 18, Beijing time, Microsoft will acquire Activision Blizzard for $95.00 per share, with a cash transaction valued at $68.7 billion, including Activision Blizzard's net cash.
It is worth mentioning that Microsoft's cash acquisition this time profoundly reflects Microsoft's "banknote ability". $68.7 billion, less than a year of Microsoft's profit, Microsoft operating profit of $69.9 billion in fiscal 2021, revenue as high as $168.1 billion.
From Blizzard's perspective, the enterprise value multiple of the transaction is 18-19 times in terms of Activision Blizzard's $3.7 billion full-year 2021 forecast of EBITDA, while the price-to-sales multiple of Activision Blizzard's $8.7 billion full-year 2021 forecast revenue is 7-8 times. Both multiples are higher than the industry average.
In addition, the $68.7 billion all-cash acquisition, which only a few giants have the strength to complete, reflects the importance Microsoft attaches to this merger. The record for all-cash acquisitions preceded Bayer's $63.9 billion acquisition of Monsanto in 2016.
Incidentally, at the current exchange rate, $68.7 billion is about 400 billion yuan, while the output value of domestic games in 2021 is less than 300 billion yuan. According to the "2021 China Game Industry Report" released by the relevant domestic official departments, the actual sales revenue of China's game market in 2021 is 296.513 billion yuan, of which the sales revenue of the domestic market of self-developed games is 255.819 billion yuan, and the scale of domestic game users is 666 million.
Microsoft's acquisition is equivalent to more than the total value of the domestic game industry last year. It's really "rich"! (Below: What is your "superpower"?) I have money! ）
After the transaction is completed, Microsoft will become the third largest global game company by revenue, after Tencent and Sony. As a result, Microsoft will form a "three-legged" pattern in the game industry together with Sony and Tencent. Microsoft's planned acquisitions include iconic franchises for Activision, Blizzard and King Studios, many of Blizzard's best-known games such as Warcraft, Diablo, Overwatch, CallOfDuty and CandyCrush and others, as well as global esports events through Major League Baseball Games. The company has studios around the world and employs nearly 10,000 people.
"Coincidentally", on the same day that Microsoft announced the acquisition of Activision Blizzard, the analyst agency NPD announced the TOP10 best-selling games of Xbox and PlayStation in the United States in 2021, including physical games and digital games, and "Call of Duty" is still the most gold-sucking IP for Xbox and PlayStation consoles in the United States.
According to IGN, this is also the 13th consecutive year that Call of Duty has become the best-selling game series in the United States. As mentioned earlier, this game is one of the signatures in Blizzard's game products.
It is worth mentioning that Blizzard Entertainment CEO Mike Ybarra only joined Blizzard in 2019. Previously, he spent 22 years at Microsoft, where he was responsible for the development of several versions of Windows and the distribution of games in Microsoft's Xbox division. Unexpectedly, in less than two years, the new owner was arrogantly acquired by the rich old owner, and Barra had to passively return to the old owner, for which Barra himself also said that he was very "crying and laughing" (the picture below is his fan smile on the social networking site).
Boosted by the good news of the acquisition, Activision Blizzard surged 37% before market hours on the day (18th), closing at $82.31, up 25.88%, and the company's market value on the day was $64.11 billion.
Pending the completion of this transaction, Activision Blizzard and Microsoft Games will continue to operate independently. Microsoft officials said that after the transaction is completed, Bobby Kotick will continue to serve as CEO of Activision Blizzard, and once the transaction is completed, Activision Blizzard's business will report to Phil Spencer, head of MicrosoftGaming.
It is reported that after the completion of the transaction, Microsoft will have 30 in-house game development studios, as well as additional publishing and sports production capabilities.
Note: Blizzard is a well-known game production and distribution company, founded on February 8, 1991 by three graduates of UCLA, Michael Morhaime, Allen Adham and Frank Pearce, under the name Silicon & Synapse; in 1994, the brand was officially renamed "Blizzard" (nicknamed "Glass Slag" by domestic players).
Blizzard has launched a number of classic series: Call of Duty, Candy Legends, Warcraft (and World of Warcraft), Diablo, Overwatch, and Hearthstone. Warcraft, Heroes of the Storm and StarCraft are all listed as major competitions by a number of famous e-sports competitions and enjoy high praise in the computer game industry. On July 9, 2008, Activision Blizzard was officially merged into Vivendi, a holding company that includes the Blizzard Entertainment brand name. In July 2013, Activision Blizzard bought back a majority stake from its parent company Vivendi and became an independent company. Blizzard Entertainment is now an independent division company of Activision Blizzard, an American video game publisher, and both are actually operated independently during the development process.
Why Blizzard?
For the reasons for Microsoft's merger and acquisition of Blizzard, it may be able to interpret one or two from the announcement, and the following paragraphs are the original text of the announcement:
Satya Nadella, Chairman and CEO of Microsoft, said: "Gaming is the most dynamic and exciting category of entertainment for all platforms today and will play a key role in the development of metaverse platforms. We're investing heavily in world-class content, communities, and the cloud to usher in a new era of gaming that puts players and creators first and makes games safe, inclusive, and open to everyone."
"This acquisition will accelerate the growth of Microsoft's gaming business on mobile, PC, console and cloud, and provide the cornerstone for building the metacosm," Microsoft said.
"Players around the world love Activision Blizzard games, and we believe their creative teams are in front of them with their best work," said Phil Spencer, head of games at Microsoft. "Together, we will build a future where people can play the games they want anywhere."
"For more than 30 years, our talented team has created some of the most successful games," said Activision Blizzard CEO Bobby Kotick. "Activision Blizzard's world-class talent and extraordinary franchise, combined with Microsoft's technology, distribution, talent pipeline, ambitious vision, and shared commitment to gaming and inclusion, will help ensure our continued success in an increasingly competitive industry."
According to the announcement, the acquisition also strengthens Microsoft's GamePass portfolio, which plans to roll out Activision Blizzard's games to GamePass, which has reached a new milestone of more than 25 million subscribers. (According to the author's inquiry, the number of users of the service increased by 7 million compared to the figures reported in January 2021.) ）
With Nearly 400 Million Monthly Active Players and $3 Billion Franchises in 190 countries, the acquisition will make GamePass one of the most compelling and diverse lineups of gaming content in the industry.
The author inquired that The xboxGamePass costs as little as $10 a month, and the service generates at least $250 million in revenue for Microsoft each month. If the number of users remains the same, the service could generate nearly $4 billion in revenue for Microsoft in 2022.
summary:
With this acquisition, Microsoft has gained 400 million monthly active players from Activision Blizzard, expanded the IP product pool (Blizzard's famous IP is too much), especially this acquisition, Microsoft management believes that Blizzard provides the cornerstone of building a metaverse, which is Microsoft's ambition.
According to the latest data from Wisdom Bud, Blizzard and its affiliates have more than 1,100 patent applications in 126 countries around the world, mainly concentrated in Activision Publishing and King' affiliates. Among them, invention patents account for nearly 90%, and more than 720 invention patents have been authorized, and the patent layout mainly focuses on video games, virtual worlds, interactive, virtual reality and other related technical fields.
Further concentrated in the field of meta-universe, Wisdom Bud data shows that Blizzard now has more than 560 patent applications in the patent reserve, which can be applied to the relevant meta-universe technology field and are all invention patents, of which more than 420 have been authorized.
Wisdom Bud said that the metacosm is a comprehensive field of technology, and video games are one of the main core applications. Since the technology corresponding to the patent does not necessarily correspond to its actual application scenario, Blizzard's metaverse patent reserve mainly refers to the overall situation of the company's patents applicable to the metaverse field.
Microsoft is "ambitious" for the metacosm. At the Ignite conference in November 2021, Microsoft announced a comprehensive layout of the metaverse, first focusing on the "enterprise metaverse", joining the game scene in the future, and its plan to turn its Microsoft Teams into a metacosm, integrating the MR platform Mesh into Teams, and the Xbox game platform will also join the metaverse in the future.
Microsoft has always had a high interest in the Metacosm. Previously, Microsoft CEO Satya Nadella had made it clear that the metacosm would have a huge impact on the world, and Microsoft would also lay out the metacosm with a "full-stack" strategy. However, compared to competitor Meta's deep roots in the social field, it is not easy for Microsoft to cut into the metaverse of the ToC side.
Pure social ports can't be cut in quickly, and the game has become the only way for Microsoft to enter the ToC side to build a metaverse. And this time to win the world's top Activision Blizzard, for Microsoft to enter the meta-universe, there is undoubtedly another team to fight against Meta.
Previously, Facebook changed its name to Meta to enter the metaverse and let the metaverse concept catch fire. The addition of Microsoft, a giant, may represent the recognition of the metaverse by the technology community. (For details about Facebook, see the author's article "Facebook's Slowing Growth Betting on the 'Metacosm'," what do you really think?) 》）
David Wagner, an equity analyst at AptusCapitalAdvisors, said:
"It's an important deal for consumers, and more importantly, Microsoft's acquisition of Activision Blizzard has indeed started the meta-universe arms race."
Games have always been the most important business puzzle for Microsoft executives, and it is one of the few businesses that Microsoft has successfully achieved in the consumer field. Compared with major technology giants such as Google and Apple, Microsoft's gaming business is huge, including the sale of Xbox console hardware and game software, as well as cloud gaming and membership subscription services.
In the third quarter of last year, Microsoft Gaming revenue was nearly $3.6 billion, up 16% year-over-year, and hardware sales increased the most, up 166%, mainly due to continued consumer demand for Xbox consoles. Microsoft's top management values the game market, or it is related to the broad prospects of the market. Market analyst firm Newzoo expects the global gaming industry to total revenues of $180.3 billion last year and could grow to $218.8 billion in 2024.
Since the launch of the first generation of Xbox in 2001, Microsoft has been investing heavily in the field of game consoles and game production in the past 20 years, and has continuously acquired to strengthen its game studio strength. Microsoft CEO Nadella has stepped up the pace of Microsoft's game acquisitions since taking office, and has acquired more than 10 game studios in a row, the most representative of which include the game developer Zeni Max Media (the parent company of the B company, representative works such as the Elder Scrolls series, especially "The Elder Scrolls 5", which is jokingly called "Old Scrolls 5" by domestic players) and mojang Studios (representative work" acquired in 2014 (representative work "The Representative Work") acquired in 2014. Minecraft").
After the completion of the acquisition of Activision Blizzard, Microsoft is fully in line with Sony in terms of game consoles and game content. Hosting, content and cloud are the three cornerstones of Microsoft's gaming business, and after the merger of Activision Blizzard, Microsoft's market share in the global gaming business will rise from 6.5% to 10.7%.
Pre-acquisition "Obstacles"
As mentioned earlier, Activision Blizzard shares closed up 25.88% at $82.31 on January 18, but there is still a long way to go from Microsoft's $95 purchase price, about 14% lower.
The reason for this huge trading spread may be the sell-off in the US stock market on the day, with the NASDAQ falling about 2.6%, and concerns that regulators have stepped up scrutiny of the M&A activity of big tech companies.
On Tuesday (Jan. 18), the U.S. Federal Trade Commission (FTC) and the Justice Department's antitrust division began rewriting merger guidelines, showing a rise in skepticism about mergers and acquisitions.
If the deal doesn't get regulatory approval, Microsoft will have to pay Activision Blizzard a break-up fee of up to $3 billion.
Still, Dan Ives, a prominent tech analyst at Wadebush Securities, said Microsoft might not face the same scrutiny as Alphabet (Google's parent company), Apple and Meta, which also faced antitrust scrutiny in 2001.
In a note, Ives wrote: "From a regulatory perspective, Microsoft does not face the same level of scrutiny as other tech companies. Ultimately, Nadella saw an opportunity to place a big bet on consumers, while other companies were watched by regulators and unable to acquire such an asset."
But he also warned, "While we expect the deal to eventually get regulatory approvals, there will be some inherent hurdles for tech deals of this magnitude in Both Washington and Brussels."
Microsoft may have expected the difficulty of the acquisition, Microsoft said in the 18th announcement that this large-scale transaction has been approved by the board of directors of Microsoft and Activision Blizzard, subject to regulatory review, the transaction will be completed in fiscal year 2023.
Who will be the next target?
At the same time that Microsoft acquired Activision Blizzard, another game maker, Take-Two (TTWO. O) also announced this month that it will buy Zynga at a valuation of $12.7 billion, which may mean that there may be more mergers and acquisitions in the industry in the future, so who is likely to be the next target?
After news of Microsoft's acquisition of Activision Blizzard, French game developer Ubisoft (UBSFY. F) shares surged 11.87%, Polish game developer CDProjekt shares rose 1.57%, and the market speculated that both companies could become targets of mergers and acquisitions. Also, if Activision Blizzard can be acquired, Electronic Arts (EA. US) also has the potential to be the next target.
Remarks: The French company Ubisoft, representative works of Assassin's Creed series, FarCry series, Prince of Persia and so on.
Polish CDProjekt, representative of the "Cyberpunk 2077", "The Witcher" series.
American Electronic Arts (EA) Company, the representative works of the "Command and Conquer" series (including the Red Alert series familiar to domestic players), "Need for Speed" series, etc.
Finally, Microsoft's acquisition of Activision Blizzard also gave Microsoft's biggest technology competitor, the Meta Platform (FB. O) brings pressure, the latter has been involved in the field of gaming, and is an industry leader in the entrance to the metaverse, "VR device Oculus". At present, the mobile game business is booming, which is not only a focus of Meta, but also a new main direction for game companies.
Microsoft said in the announcement on the 18th: Mobile phones are the largest segment of the game, and nearly 95% of players around the world are playing mobile games. With a strong team and technology, Microsoft and Activision Blizzard will enable players to enjoy an immersive gaming experience wherever they want. With gaming, Activision Blizzard's mobile business represents a significant position and opportunity for Microsoft in this fast-growing space.
(Expanded data: Data from IDG Consulting shows that mobile games are the fastest-growing segment of the global entertainment industry today, with total mobile game subscriptions reaching $136 billion in all of 2021, and the agency predicts that this data will continue to rise at a compound annual growth rate of 8% over the next three years.) ）
Written at the end: For this acquisition, as a player may be more concerned about, is Warcraft and Diablo updated? When will Overwatch 2 come out? Microsoft, which has a lot of money, may really be able to rekindle the war in Azeroth! And our next meeting may be in the metaverse!
Read more: Big buys in the history of gaming
In addition to Microsoft's acquisition of Blizzard, comb through the world's large-scale acquisitions in the game industry.
First, Take-Two acquired Zynga for $12.7 billion.
Once the king of casual social gaming in the United States, Zynga became a household name since its founding in 2007 with its rapid expansion on Facebook.
In early 2022, Take-Two, the parent company of Grand Theft Auto developer R Star, acquired Zynga for $12.7 billion, making it the largest acquisition in the history of the game at the time, but now it seems that the number one position has only been in place for a few days.
Second, Tencent acquired Supercell for $10.2 billion.
Supercell, a Finnish mobile game developer founded in 2010 and once considered the world's number one mobile game company, is best known for Clash of Clans, Island Raiders, Hay Day and Clash Royale, all of which generated more than $1 billion in revenue. In June 2016, Tencent acquired an 84.3% stake in Supercell from SoftBank for $8.6 billion.
Third place: Microsoft acquires ZeniMax Media for $7.5 billion.
In September 2020, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of well-known game developer B. Society B is arguably one of the world's best manufacturers of open-world games, and its Elder Scrolls 5 is an open-world milestone in the history of games, with sales exceeding 50 million copies (as mentioned earlier).
Author: Xu Yuanyao