Posted on Jan 18, 2022 at 3:21 pmUpdated Jan 18, 2022 at 7:26 PM.
Should we really regard this deal as the takeover of the century in the video game industry? In any case, it is already one of the most significant events ever recorded in the entire history of entertainment with the history of Fox by Disney in 2017 or the history of Time Warner by AT&T in 2016. Tuesday, Microsoft announced that it would buy Activision Blizzard, one of the largest video game publishers In the world with 400 million players in 190 countries, with nearly 70 billion dollars. It is Microsoft’s largest acquisition since its inception.
That amount represents an additional 45% premium over the Monday night stock market closing price for a group known for its stellar franchises such as Call of Duty, Candy Crush or World of Warcraft. In 2013, Vivendi sold 85% of the capital for $8.2 billion. Which then estimated the American publisher at $9.6 billion, nearly seven times less.
4.5 billion players in 2030
But since then, the video game sector has continued to grow economically, breaking records, driven in particular by digitization or more recently by restrictions that have increased its consumption. Today’s video game weighs in at around $200 billion.
The cultural industry is also registering the strongest growth. According to Microsoft, there will be 4.5 billion gamers on the planet in 2030, compared to 3 billion already today.
Microsoft CEO Satya Nadella wrote referring to these virtual worlds inhabited by avatars, one of the “new horizons” of technology. The process will also help Microsoft speed up the metaverse process, which the group is already rolling out to its Teams videoconferencing software. A way for the group to create synergy between its consumer activities and professional activities.
Be the ‘Netflix of video games’
But initially in the video game, Activision Blizzard’s assets will allow the Bill Gates-founded company to set foot on the gas pedal in the short term. Because with the acquisition of Activision, Microsoft will be able to expand its content catalog, get its hands on the creative studios, and thus enhance the Game Pass offering that is today Microsoft’s bridge to video games. Reason ? The group, led by Satya Nadella, aims to become the “Netflix of video games”.
For a monthly subscription, Game Pass gives access to a selection of several hundred games. It now has 25 million paying subscribers worldwide. In this area, Microsoft is now overtaking its historic rival Sony, whose sales of PlayStation home consoles have always outstripped those of the various Xbox consoles marketed by the Redmond group since 2001.
“The big maneuvers will continue.”
“If Microsoft goes through big exclusive licenses, like Call of Duty or World of Warcraft on Game Pass, that will put a terrible pressure on its competitors, including Sony but also Amazon, Google and all the players who have launched the platforms recently.” argues Charles Louis Blannad, Financial Analyst For video games in TP ICAP.
“Major maneuvers will continue because these actors will have to respond. They have the means but they have to act fast because there aren’t many big companies left as interesting as Activision. Ubisoft is clearly the next potential target, especially since the price is very low compared to Activision’s valuation multiples” The expert continues.
On Tuesday evening, the French industrial champion’s share price closed nearly 12% higher, pushing its market capitalization to more than 6 billion euros. And in recent months, massive acquisitions have multiplied in a sector where the content war is in full swing. Eight days ago, Take-Two (GTA Franchises, Read Dead Redemption) announced that it was acquiring Zynga, with a check of more than $12 billion.
Prior to that, Microsoft had already bought Bethesda (Doom, The Elder Scrolls, Fallout) in September 2020 for $7.5 billion. This has already made it one of the most important mergers and acquisitions in the history of the video game industry. This time, the amount will be nine times higher … Once its acquisition of Activision is completed in 2023, Microsoft will become the third largest video game operator in the world in terms of sales, behind the Chinese company Titan Tencent, which is increasingly present in Europe, and Sony.