2022 has only begun for more than half a month, and the global game industry has continuously experienced big news that affects the entire industry.
On January 11, Rockstar and Take Two Interactive, the parent company of 2K Games, announced the acquisition of social game developer Zynga, a $12.7 billion acquisition that would have shocked the outside world, after all, Zynga's value as a mobile game company has even exceeded the $7.5 billion spent by Microsoft in 2020 to acquire "B Society" Bethesda.
However, Microsoft did not let the industry record set by Take Two Interactive hold for too long, just late on the night of January 18, Microsoft officially announced that it would acquire game giant Activision Blizzard for a total price of $95 per share, a total of $68.7 billion, and Activision Blizzard would continue to operate independently after the acquisition was completed.
This news can be described as an instant detonation of the game industry, not only because the nearly $70 billion "sky-high" cash acquisition once again shows Microsoft's wealth, but more importantly, Activision Blizzard, which has been criticized by players for a long time, was finally paid by Microsoft, but it became a relatively good home.
Microsoft announced the acquisition of Blizzard
At the same time, Microsoft seems to be fully aware of what players are thinking at this moment, in the press release, Microsoft's game department and Xbox head of Phil Spencer said that it will try to add as much as possible in the Xbox Game Pass and PC Game Pass to automatically see Blizzard games, and unsurprisingly once again announced the global subscriber number of Xbox Game Pass (hereinafter referred to as XGP), which has now reached 25 million.
It can be said that the biggest significance of Microsoft's acquisition of Activision Blizzard is not only to push itself into the third position of global game revenue, just like the acquisition of B Society in March last year, after making up its mind to promote XGP, Microsoft needs a large number of first-party quality works more than ever, although the mouth is scolding, but the game IP in Activision Blizzard's hands still has great appeal to players.
If the acquisition can finally pass antitrust review, there is no doubt that Microsoft is a big step closer to creating the "Netflix of the game world".
Behind the "banknote capability", just for IP?
Unlike many super-large acquisitions in the past that were first disclosed by the media in advance, and then the two parties to the transaction were constantly bargaining, the Microsoft acquisition of Activision Blizzard had almost no news exposure before the official announcement, and finally the Microsoft official personally issued a press release to announce it.
This practice of flat ground and thunder does amplify the public opinion effect of this acquisition.
After the official announcement, gamers who were already good at playing terriers flooded social media with massive terriers.
According to Microsoft's estimate of the purchase price, the acquisition is at a premium of about 45%, the transaction will be carried out in full cash, and if it can successfully pass the antitrust review of various countries, it is expected to be completed by July next year. After the acquisition was exposed, Activision Blizzard shares directly soared more than 30% directly before market, and Microsoft's old rival sony in the gaming business fell more than 12% today.
Activision Blizzard share price
The deal is not only the largest acquisition in the global gaming industry to date, but also the largest acquisition Microsoft has made since its founding in 1975.
In this transaction, Microsoft will obtain the operation and management rights of all studios owned by Activision Blizzard and its subsidiary King, and will also obtain the ownership of world-renowned game IP such as "Call of Duty", "Warcraft Series", "Diablo", "Overwatch", and "Candy Crush Legend".
Of course, Activision Blizzard, as one of the world's largest game developers and publishers, has pocketed it, which is undoubtedly a great enhancement of its voice in the game industry for Microsoft, and further enriches the game content ecology of Xbox.
Previously, although Microsoft was the world's three largest game console manufacturers, although its overall game revenue ranked first in the world, most of its revenue came from console hardware, and the game business was not its main source of income.
In 2021, in terms of game development and production, Tencent ranks first in terms of revenue, Sony in second place, Nintendo in third place, and NetEase and Activision Blizzard. This time, after Microsoft's acquisition of Activision Blizzard, it will leapfrog Nintendo in the game development and production business, ranking behind Tencent and Sony.
Microsoft CEO Nadella also said today that the deal will play a key role in the next step of Microsoft's metaverse development, believing that these game IPs will be a good entry point into the metaverse.
Activision Blizzard's addition of these big IP, so that Microsoft has become the second like Thanos after Disney to collect the Infinity Stones of the big company, the existing "Minecraft", "Halo", "The Elder Scrolls", "Fallout", "Doom" plus the "Call of Duty", "World of Warcraft", "Diablo", "Overwatch", etc., 25 million Xbox subscribers plus Blizzard's nearly 400 million monthly active users around the world, will likely make Microsoft unstoppable, And rewrite the competitive landscape of the game industry after that.
But the deal also has a lot of complexity.
In July 2021, California regulators filed a lawsuit against Activision Blizzard alleging sexual harassment and gender pay discrepancies among the company's roughly 10,000 employees, and Activision Blizzard's stock price has fallen nearly 30 percent since then.
According to the Wall Street Journal, Bobby Kotick, a longtime CEO of Activision Blizzard, will leave after the deal closes. Although Microsoft said in its announcement that Kotick will continue to serve as CEO of Activision Blizzard, and that the Activision Blizzard business will report to Phil Spencer, head of Microsoft's gaming business, after the completion of the transaction. But people familiar with the matter said the two companies had reached an agreement that Kotick would leave after the deal.
Since California filed the lawsuit, Activision Blizzard, Kotick and their boards of directors have faced intense pressure from shareholders, business partners and other third parties for allegations of misconduct.
The most critical thing is that Activision Blizzard's constant workplace scandals have also led to a large loss of talent, and the final result is that both the quality of the game and the development of new works have been greatly affected, and for a long time, Activision Blizzard has nothing to do with topical game masterpieces.
Therefore, for now, the industry has given a cautiously optimistic evaluation of Microsoft's acquisition of Activision Blizzard, after all, the latter has been worse than now, and Microsoft, as a successful transformation of the old technology company, has a clear investment in the game business for all to see, through Microsoft's external forces to reform, there may be an opportunity to put Activision Blizzard's business back on track.
For the vast majority of players, the biggest significance of this acquisition is that in the future, new year works like Call of Duty will undoubtedly directly join the XGP subscription service. And this AAA masterpiece from the buyout system to the subscription system process, the past decade is probably the most familiar with the streaming media users, and now the game manufacturers are actually replicating the "streaming media war" grand situation.
"Netflix in gaming" is the real ambition
Wanting to make Xbox Game Pass the "Netflix of the game world" is not wishful thinking from the outside world, which is actually the expression of Microsoft's CEO himself.
In 2019, Microsoft CEO Satya Nadella said that Microsoft is building "the Netflix of gaming."
Going back to an article in Fastcompany in 2017, Nadella also wrote about his personal connection with the company Netflix. In the article, Nadella revealed that while he has been in charge of Microsoft's Bing search engine project, Netflix CEO and co-founder Reed Hastings became his mentor early on.
Hastings told Nadella that "you can be an insider at Netflix and come to all our meetings and be an off-site executive." Over the course of a year, Nadella would take advice from Hastings. Nadella also mentioned that even now, Reed has given him a lot of advice on what to do and what not to do.
In the same year of this interview, Nadella was seeking a reasonable market positioning for Xbox's Game Pass subscription service. Given his familiarity with Netflix's business model and his internal perspective on how he's become a market leader, it's hard to believe that Nadella's positioning XGP as the "Netflix of gaming" is by no means a whim.
Although Microsoft's game subscription model will not completely imitate Netflix one-to-one, the strategy adopted by those streaming media that makes Netflix the most mainstream in the market is actually no different from Microsoft's strategy of making XGP a mainstream game subscription service.
When Netflix switched from DVD rental to online streaming in 2007, its subscriber number was only 7 million, and in the following years its subscriber growth rate was far less strong than later, and two important turning points came from its international expansion in 2010 and the success of Netflix's original drama "House of Cards" in 2013, after which Netflix's subscriber growth entered the fast lane and broke the 200 million mark in 2020.
The most critical point in the development process of Netflix is its continuous investment in original content, today's XGP is actually similar to the early Netflix, there are a large number of third-party content, such as EA games and some Japanese manufacturers' works, these third-party works also have cooperation cycle restrictions, so it is often possible to see XGP continue to have new works to join and works suddenly disappear.
If Xbox is the equivalent of Netflix Original, then the little content xbox xbox itself can provide is XGP's biggest weakness at the moment.
Since the service began in 2017, although Microsoft has launched first-party masterpieces such as "Sea of Thieves", "Forza Horizon 4", "Gears of War", "Forza Horizon 5", "Halo: Infinity" and other first-party masterpieces, the overall xbox first-party game quality is not as good as Sony PS for a long time.
This is also why in 2020 Microsoft will find EA to cooperate, after the launch of the latter's EA Play subscription service, XGP subscribers can also play some games on EA Play for free, such as "Two-Player Trip", which won the TGA Game of the Year Award last year, and the addition of EA games has in fact rapidly expanded the number of XGP games. And just recently, there were rumors that Ubisoft+' own game subscription service, might partially join XGP at some point this year.
Getting 25 million subscribers in more than four years is really not ugly, but for Microsoft, which is committed to leading the game subscription service, to take the next step faster, they need a faster original content strategy than Netflix, which is why Microsoft has chosen to directly acquire large game companies for two consecutive years.
From this point of view, the development of XGP is more like a combination of Microsoft's ideas after carefully observing the two development paths of Netflix and Disney+.
On the one hand, More than a dozen xbox studios are still continuing to build new projects based on internal IP, on the other hand, in order to quickly expand the scale of XGP first-party content, large-scale acquisitions are the best choice, this acquisition of Activision Blizzard is completely Disney before the launch of Disney+ at all costs to win the 21st Century Fox version, the difference is only that Microsoft is really much richer than Disney.
When we see Xbox Game Pass relative to Netflix as a change in the way consumers engage creative content, it's important to notice a certain paradigm shifting trend.
Netflix didn't achieve its global dominance overnight, and it took a long time for users to fully embrace streaming, and over time, Netflix needed to build on a network of relationships in the entertainment industry, improve the quality and diversity of its exclusive content, and take advantage of technological advances to amplify its strengths.
Today, the game subscription market is still very immature, especially compared with streaming, XGP is still very young, and more importantly, the technical investment and content investment required for game subscription services also have a lot of room for growth.
As mentioned before, today's game giants are launching their own game subscription services, XGP, EA Play, Ubisoft + and even earlier Apple Arcade, after the rise of XGP, at the end of last year, it was also reported that Sony is planning its own game subscription service, and there are old-school game companies like Nintendo that are slow to transform, and Tencent, NetEase, which have extremely high revenue but do not have a strong sense of presence on the console and PC side. And Amazon has never given up on trying in the game business.
Perhaps when the war on game subscriptions begins to be completely ignited like Disney and Warner's decision to challenge Netflix head-on, looking back at the several acquisitions that Microsoft has now spent thousands of dollars on XGP, it will truly find its long-term value far beyond the current.