Leaf&Core

Microsoft Buys Activision Blizzard: Is Gaming in Trouble?

Danielle from Leaf and Core
Reading Time: 6 minutes.

The Xbox logo over top of the Activision Blizzard logosActivision started in 1979, making games for the Atari Video Computer System. It was started by engineers who were mistreated at Atari and decided to make the first independent third-party game publisher. In 2007, the company bought Blizzard Entertainment, primarily for Blizzard’s popular MMO, World of Warcraft. Activision Blizzard went on to make many popular games, like Tony Hawk’s Pro Skater, Call of Duty, Overwatch, Diablo, and more. If you play games, you’ve certainly played one of Activision Blizzard’s games. If you only play games on your phone, you’ll be happy to know you haven’t been left out. In 2012, Activision Blizzard acquired King, makers of one of the highest grossing and most well-known mobile games of all time: Candy Crush Saga.

Last week, Microsoft bought the already massive company for $68.7 billion. It dwarfs the previous largest video game company buyout by over five times. The previous largest sale of a game company was $12 billion, when Take-Two bought Zynga. That also occurred earlier this month. 2022 is already proving to be a year of massive, unprecedented takeovers.

The potential purchase would make Microsoft the third largest video game company, by profit, in the world. That’s nothing for the second wealthiest company on the planet. After all, to be the best, you simply have to buy the best.

That’s what pay to win is, right?

Will Microsoft be able to buy its way to a monopoly on game content, edging out its primary competitor, Sony? And what are they going to do about the massive cultural problems at Activision Blizzard? Are they hoping people would forget that toxicity is now a part of Microsoft’s culture?

Not that Microsoft’s culture is known for being a good one to begin with.

Activision Blizzard’s Problems

By now, you’ve likely already heard all about the problems at Activision Blizzard. The company’s sexist and toxic culture held women back and may have contributed to an employee’s suicide. While a Wall Street Journal report claimed that Microsoft saw Activision Blizzard’s troubles as the perfect time to buy the beleaguered company, they may want nothing to do with the culture of Activision Blizzard.

“Deal-hungry Microsoft had long been interested in Activision and had discussed a potential acquisition in the past, some of those people said, but Mr. Kotick was cool to the idea until Microsoft offered him a graceful exit”

– From the Wall Street Journal’s reporting

Microsoft has stated that they “value individual studio cultures,” but expect all divisions of Microsoft to respect Microsoft’s “journey for inclusion.” Certainly that calls for significant changes at Activision.

Activision Blizzard CEO Bobby Kotick may have been looking for an out as well. While he denies it, some close to the company claim he had considered buying a gaming website like Kotaku or PC Gamer to change the company’s “public narrative.” 1,000 Activision Blizzard employees signed an open letter requesting that Kotick leaves the company for his part in the alleged conditions at Activision Blizzard. Kotick’s 0.53% stake in the company means he will leave with $400 million from his shares. Now, with Microsoft buying the gaming giant, they’ll get their wish… but they likely didn’t want Kotick walking away with $400 million.

The Future at Activision Blizzard

Bobby Kotick will be out as Activision Blizzard’s CEO after the deal is complete. Then, head of Xbox at Microsoft, Phil Spencer, will lead the company. The two companies expect the buyout to complete sometime in 2023, likely June or July. According to Kotick, Microsoft will try to “retain as many of our people as possible.” Activision Blizzard has about 10,000 employees. Still, workers aren’t sure this is sufficient. The company hasn’t made enough progress to fix their own problems, and could just use the buyout to whitewash their history, without making any real changes.

Workers don’t want people to forget the crimes of Activision Blizzard. Many still haven’t returned to work this year due to a strike for Raven QA employees that Activision Blizzard terminated. Thousands of employees have pledged support of drastic changes at the company. Microsoft hasn’t committed itself to any specific changes.

A Monopoly in the Making

With this acquisition, the already gigantic Microsoft will become even larger. But it’s not the fact that they’re already the second wealthiest company on the planet, or that, by revenue, will become the third largest gaming company. The real problem is that this is an acquisition specifically to stifle competition through the use of exclusives. Microsoft is likely doing this to keep Sony from having Activision Blizzard games. Alongside their earlier purchase of Zeni Max Media, owner of Bethesda Softworks, Microsoft has cornered some of the most popular game series ever created. And they bought them so no one else could play them.

Microsoft’s game series now include (but are not limited to):

Microsoft likely purchased these series to make them exclusives, and has outright said as such about a few of them. While Sony’s not much better, they usually make a few games with a studio before buying it. At that point, they already have exclusivity and a working relationship. However, Microsoft buys companies to force them to become exclusive games to the Xbox/PC platform. They’ve already stated that Elder Scrolls 6, which was presumably supposed to be cross-platform, will now be an Xbox exclusive. The “sequel” to Skyrim, the game that’s on every platform, even your Amazon Echo, will be exclusive to one console because the second richest company in the world said so.

Activision got its start with disgruntled employees making the first third party publisher. Now, thanks to the second wealthiest company in the world, it’s back to being a first party publisher.

Monopolies Destroy Creativity

Games are an art form. Game companies need to make new and exciting games to convince people to buy them up. However, we’ve seen stagnation in gaming, with only a few notable outliers. Without the need to compete and innovate, games can become bland copies of previously released games. A tweaked story, maybe a new setting, but the same rendering engines and game premise are re-used over and over again. Perhaps the worst offender is the FIFA series, which fans accuse of never changing outside of the roster, because it doesn’t have to. What other competition does FIFA have? The same goes for Call of Duty. These games will be successful no matter what, so they don’t have to evolve.

What has happened to individual franchises can now happen to an entire market. With Microsoft forcing exclusivity on some of the most popular games in the world, many people will question why they need a Playstation. They’ll exclusively buy Xbox consoles or Xbox Game Pass. Gaming was already limited on the console front. Nintendo doesn’t compete directly with Microsoft or Playstation, creating a sort of duopoly between the two. This one massive acquisition could be enough to push Sony aside in the gaming market. That is, unless they also choose to play dirty.

More Bad Business Practices

The share prices of independent game publishers jumped when Microsoft announced their buyout. They set a new bar in the billions. If Sony wants to really compete with Microsoft, they have to consider buying other gaming giants. That includes Electronic Arts and Ubisoft, two huge independent publishers. While this may help Sony survive with their own popular franchises, now exclusive to their platform, it’s horrible for consumers. It limits choices and forces people to potentially own two systems or accept being locked out of half of all games that are released.

 

 

Where do we Play Now?

“Had good calls this week with leaders at Sony. I confirmed our intent to honor all existing agreements upon acquisition of Activision Blizzard and our desire to keep Call of Duty on PlayStation.”

-Phil Spencer, head of Xbox. Emphasis added.

Microsoft won’t pull the rug out of any existing arrangements between Sony and Activision Blizzard, but made no promises about future deals. Microsoft bought these studios to make their games exclusive to the PC and Xbox. They bought them to limit competition and move themselves towards a monopoly. Regardless of how this goes, if Sony buys up other exclusives for tens or hundreds of billions of dollars or if Sony just exits the hardware business, consumers lose. They lose choices and unique games. Expect higher prices for consoles, games, and game streaming options when Microsoft calls all the shots.

Microsoft’s merger hasn’t been approved yet. The Federal Trade Commission (FTC) has finally woken up to the monster it has created. They’ve started indicating a more aggressive antitrust stance for the future. It’s possible that they could recognize this acquisition as the market consolidation it is and refuse to approve it under antitrust laws. We need to break up big tech. While we normally think of Facebook (Meta), Google, Amazon, and Apple for this, we need to also include game studios. Quietly, companies have acquired massive parts of the market. Soon, it’ll be impossible to find a unique, exiting game from an indie publisher on multiple platforms. The days of being free to make those kinds of choices could be a thing of the past if the FTC doesn’t step in. As of now, it looks like Microsoft dealt a blow to their competitors and consumers alike. Let’s see if it sticks.

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