Analysis: Microsoft’s Activision Purchase Involves Smartphones, Metaverse, and Service

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Take-Two’s $12.7 billion purchase of Zynga was the biggest in the video game industry for a week. Tuesday’s announcement that Microsoft has signed a deal to acquire Activision Blizzard for $75 billion has raised the bar even further in the billion-dollar race of the video game industry.

It is the biggest acquisition in the history of Microsoft. Until then, the biggest purchase was that of the social network LinkedIn, for US$ 26 billion (R$ 143.5 billion), in 2016.

The records broken in a few days underline the dynamism of the games sector, a key element in several technology trends.

Microsoft is aware of this. When installing the Windows operating system, the user is invited to try the Office package, from the Word, Excel and Powerpoint programs. Then, you receive a similar offer to test Game Pass, a subscription service that works like a Netflix for games. It is the flagship of the Xbox division, which also produces the eponymous consoles.

Activision Blizzard should inflate the Game Pass catalog, which now has 25 million subscribers.
With the purchase of Bethesda in 2020, for US$ 7.5 billion (R$ 41.4 billion), Xbox has strengthened the offer of first-person shooters. In addition to Activision, owner of the “Call of Duty” (“CoD”) series, Xbox becomes the inescapable home of the genre, one of the most popular in video games.

Ironically, Microsoft also adopts Crash Bandicoot, which in the 1990s became the mascot of PlayStation, from direct competitor Sony.

Game Pass is important, but it’s far from the only reason for the business.

Within Activision’s portfolio are games from King, owner of popular smartphone titles, “Candy Crush Saga” being the best known. “CoD” took advantage of King’s technical expertise to reach cell phones. Released in 2019, “Call of Duty: Mobile” is a frequent visitor to the most downloaded and played lists.

This synergizes with Microsoft’s effort to make Game Pass an attractive offering not just for consoles and computers. Today hundreds of titles, many of them state-of-the-art, can be enjoyed even on budget cell phones due to cloud technology.

With this arrangement, games run via streaming. It’s similar to what happens in the videos. However, game streaming requires faster connections, as it is necessary to send commands to a distant server. The arrival of 5G should further popularize this technology, which in practice eliminates the need for high-end hardware.

Another strategic aspect is the metaverse. A buzzword in the technology world, in practice it means a virtual reality experience, with people acting through three-dimensional avatars. The bet is that work meetings, fashion shows or family get-togethers can be transposed to the metaverse.

A game that already fulfills several requirements of a metaverse is “World of Warcraft”, also from Activision Blizzard’s portfolio. In this title, several players interact at the same time in a medieval fantasy universe. It was released in 2004 and since then it has received updates. Considering the short lifespan that video games tend to have, “WOW” is a living dinosaur.

Although it is a record, the purchase of Activision comes at a time of low for the company. Last year was marked by numerous reports of a toxic work environment, with abuse and misogyny. The scandal involves even the top of the company’s hierarchy. According to the Wall Street Journal, Bobby Kotick, the chief executive of Activision Blizzard, was aware of the cases.

The series of scandals sparked protests by players, strikes by employees and demonstrations by partner companies.

Phil Spencer, chief executive of Microsoft’s gaming division, even said he was reevaluating relations with Activision in November last year. Spencer will, in practice, be the new head of Activision if the deal goes through.

Microsoft’s official text says that Kotick will be kept in office while the agreement is evaluated by Organs competent bodies. The construction of sentences leaves the executive’s future ambiguous.

In making one of the biggest bets on the future of video games, Microsoft will have to face the mistakes that put Activision Blizzard in check.

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