On January 18, 2022, Microsoft announced plans to acquire Activision Blizzard. It’s a platform holder that buys one of the biggest game publishers and one of the biggest games in the world. Activision’s flagship, Call of Duty, has seen some dips in recent years, but it’s still a massive franchise. What’s more, it’s one of the most popular games on the PlayStation.
Activision Blizzard is also a company embroiled in lawsuits and ongoing conflicts with employees, and its reputation has been severely damaged by a sexual misconduct scandal.
I’m a business journalist, and there’s been a lot of talk here about industry consolidation, workplace practices, and business models. But if my Twitter feed is anything to go by, there are plenty of tough questions from gamers too—especially about what this means for the future of Call of Duty and how PlayStation might respond to this industry-changing announcement.
It is too early to know the answers to these questions. But we can make some educated guesses based on what each company says. So let’s get started.
Why would Microsoft do this?
Whenever you talk to Microsoft, you hear executives and marketers talking about the “billions” of gamers it wants to reach. Considering that its consoles never even crossed the 100 million mark — in fact, only a handful of them do — the company has to go beyond consoles to do that.
This involves going big in PC, going big in mobile, going big outside of the US and Western Europe. It’s about making console games more accessible and affordable.
That’s why it built Game Pass, that’s why it’s trying to make game streaming work, and that’s why it’s buying all these games and studios and investing heavily in technology and cloud gaming.
For obvious reasons, a lot of people will focus on Call of Duty. It is one of the largest gaming brands in the world. But at Blizzard, Microsoft has a major PC game studio, and at King it will have one of the most successful mobile game developers. Activision — even more so than Bethesda — provides Microsoft with the creative talent and content it needs to reach “billions” of gamers for its work through subscriptions, streaming and technology.
That’s its goal.
Is this a good thing?
Massive consolidation of gaming companies could lead to concerns about creativity and opportunity. But there are also potential positives. Activision Blizzard may have more freedom to spend longer on their games and no longer feel the pressure of having to regularly release big sequels to their franchises. For gamers who care about Blizzard’s recent offerings, being part of the Microsoft family may give them the space they need to get back to their best.
Is this a monopoly?
Microsoft will inevitably face some questions around the deal. Antitrust and monopoly laws are designed to stop a company from becoming too dominant and put them in a position where they basically control the market. In this regard, Xbox is now undoubtedly a huge gaming powerhouse, with some of the biggest and most profitable games. It has the power to truly transform the business into a subscription-based future.
However, the gaming industry is huge, and there are a lot of big players out there. Xbox probably has many big IPs and developers and operates across most major platforms. But it’s not the biggest console game company — that’s Nintendo and Sony. On PC, it’s a long way from challenging Valve. In the mobile space, King may be the main player, but there are other big names like Zynga.
But those are just traditional game companies. Facebook’s investment in the Metaverse, Epic Games has Fortnite, it has Roblox, Google has Stadia, Apple has it on mobile, and even Netflix and its gaming expansion. There are a lot of games competing now. It’s never been this simple, but there are plenty of reasons that Xbox isn’t a monopoly on gaming. Not yet anyway.
Is Call of Duty exclusive to Xbox?
Will not. Call of Duty is sure to remain on Xbox, PC, and smartphones. The real question is: Will Microsoft stop Call of Duty on PS5?
Possibly, but not absolutely. Call of Duty is a global mass-market gaming brand that extends far beyond one platform. In many ways, it’s not too different from Minecraft (Minecraft), a true multi-format video game that Microsoft is also running. Removing Call of Duty from the PlayStation would boost sales of the Xbox console, but in the process could hurt Call of Duty — a franchise that has many fans on Sony’s consoles. Xbox will likely see great value in making big games on rival consoles.
However, you might argue that the same is true for The Elder Scrolls, and Microsoft has made it clear that the next game in the series will be an Xbox exclusive.
Call of Duty: Warzone?
This already has an active and engaged audience on PlayStation, and as a free-to-play game, the focus is on making it as accessible as possible. So in this case, I would be very surprised if Warzone disappeared from PS5. Like I’d be surprised if Elder Scrolls Online suddenly became an Xbox exclusive.
Will World of Warcraft come to Xbox?
It’s possible, but it’s always been. Microsoft’s acquisition isn’t just about the Xbox console. In fact, they’re mostly pushing the Game Pass subscription service on PC. Microsoft has some popular PC games like Age of Empires and Flight Simulator, but Blizzard takes it to another level.
For Microsoft, the real thing is merging IPs like Warcraft into its existing PC Game Pass subscription service.
Can Xbox solve Activision Blizzard’s workplace issues?
You must hope so. Microsoft isn’t perfect, but it’s always trying to build a more inclusive, welcoming and diverse business. Not much to say, but the Xbox management team is one of the most diverse in the gaming industry, and it’s rightfully proud of it.
It’s worth noting, however, that Microsoft has a “limited integration strategy,” which basically means it buys companies, helps them, but ultimately lets them operate as they want. The idea was that if they stepped in too much, it could undermine the reason for its initial success (Xbox has certainly made these mistakes before). This strategy started with the acquisition of Mojang and so far has worked well.
Activision will turn to Microsoft for help. I doubt it will.
Workplace culture doesn’t change overnight. The new process takes time to get used to. Bad apples need to move on and be replaced by the right people. Microsoft can certainly help, but it will take time.
Should PlayStation buy Take-Two/EA/Ubisoft?
It depends on what PlayStation wants to achieve. The reason Xbox needs these studios and these games isn’t just to sell more consoles, but to expand its user base in Game Pass and enter new markets.
Sony already has a successful console platform with a strong studio base for making great games, and it’s currently popular in more markets than the Xbox.
But it faces competition, not only from within the game, but also from outside. If it wants to fend off those rivals, or even better compete with new concepts like Game Pass, it may need to keep buying.
PlayStation has been acquiring companies. These acquisitions may not rock the industry like Activision or Bethesda, but that’s the gaming industry we’re talking about…who can say where the next smash hit will come from? It could be a big studio like Infinity Ward, or it could be a brand new startup. Sony has been investing heavily in the new team over the past 12 months. Last year, it signed Deviation Games (former Call of Duty veteran), Firewalk Studios (former Destiny man) and Haven Studios (former Assassin’s Creed developer) for its first game. Maybe this generation’s hit video game will come from one of them, not an established player.
But watch out for this space. We are in a rapidly integrating world. Maybe next week we’ll hear that Sony is acquiring Ubisoft. Or Facebook is buying Sony. or Netflix. The gaming industry is changing rapidly.
who is the next?
Possibly anyone. We can all see the appeal of a company like Sega to Xbox, or Square Enix to Sony. There are many people wanting to buy, the question is who might want to sell?
Take-Two, Ubisoft and Nintendo have previously said they would not sell. But things have changed. Ubisoft is currently struggling to retain employees after a series of workplace scandals, and its games and business practices are under criticism. It may have been known for resisting hostile takeovers before, but may it be more open to friendly takeovers now?
All I can say is that we’re less than three weeks away from 2022 and we’ve made two of the biggest game acquisitions in history (the other being Take-Two/Zynga). There will be more.