Microsoft's takeover of Activision Blizzard has angered analysts

Microsoft’s takeover of Activision Blizzard has angered analysts

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An announcement like this could inspire a good number of analysts, whose post on the Games Industry website went to collect their views. “This deal is almost out of another world and will change the industry forever. Microsoft’s first-party studios, in my opinion at least, have been behind Sony for a very long time. They needed a big fix to catch up with Sony, and Bethesda wasn’t enough: This deal could change the rules of the game for them‘” notes first Serkan Toto of Kantan Games. It’s clear that Microsoft will have the largest family of studios (more than 30) the industry has ever known.

In a press release, Microsoft estimated that the Activision Blizzard merger would allow it to rise to the third-largest video game circulation, after Tencent and Sony. Nick Parker of Parker Consulting, especially sees Microsoft’s jump to the number one rank of manufacturer with Sony dropping to third and final place. “If supply issues are resolved this year, the addition of Activision Blizzard franchises could finally make the Xbox a tempting console for first-time buyers.“, He says.

Lisa Cosmas Hanson of Niko Partners sees the scale of the operation “amazing“and this is”It attests to the importance of the video game industry in the world.As a reminder, Disney’s purchase of the much-publicized 21st Century Fox amounted to $71.3 billion, not too far from the amount Microsoft would spend in cash to afford this pool of three major brands.

DFC Intelligence’s David Cole felt something was going to happen with Bobby Kotick’s group, but he didn’t think anyone would come to take on Activision, Blizzard, and King at the same time. “We knew something was likely going to happen with Activision Blizzard. However, we didn’t expect a company like Microsoft to come in and buy everything. Activision, Blizzard and King were already three unique companies and speculation has been in the direction of a split. For contributors, this is probably the best possible scenario, because valuation is really strong. Microsoft was one of the only companies willing to swallow a pill, which was a surprise‘, he comments.

The truth is that this acquisition strengthens Microsoft in all three major market segments. Console, first and foremost, Call of Duty is the most played game every year on PlayStation and Xbox in the United States. PC, with popular Blizzard franchises (World of Warcraft, Diablo, Overwatch). But also on mobile devices, both in the unofficial market (Candy Crush) but also increasingly in the gaming market (Call of Duty Mobile and Diablo Immortal are only the beginning of a major assault on mobile devices). Through all these platforms, the group claims nearly 400 million active users.

Lisa Cosmas Hanson is one of those who specifically insist on the mobile issue, the only part where Microsoft has not been present so far. “More importantly, this deal includes the acquisition of King and several other mobile game studios owned by Activision. Mobile games are essential for Microsoft to reach three billion gamers around the world“, Emphasizes.

By integrating Activision Blizzard, Microsoft is also strengthening its presence in esports as well as in Asia. “Activision Blizzard has a bigger presence in Asia than Microsoft, probably because the latter has focused on consoles and most Asian gamers prefer PC and mobile. In addition, Japanese brands of gaming hardware dominate in Asia. This acquisition allows many pieces of the video game industry puzzle to fit together well on a global scale.‘,” noted Lisa Cosmas Hanson.

Sony’s only response regarding content would be to buy a Take-Two, but that’s unlikely.

Carol Severin, Media Research

However, if we go back to the world of consoles, it’s hard to comment on this agreement without referring to the case of Sony Interactive Entertainment, Microsoft’s direct competitor since it debuted in video games 20 years ago. Technically, Microsoft will soon be able to remove the Call of Duty license from the PlayStation ecosystem if desired, just as Bethesda’s next big production (Starfield and The Elder Scrolls 6) is now expected on Xbox, PC and Game Pass only.

It’s very difficult to gauge the impact of losing a franchise like Call of Duty for PlayStation, whose economic health depends heavily on successful third-party games like CODs as well as PlayStation Plus subscriptions. One could even say that Call of Duty is part, along with FIFA, Grand Theft Auto and Fortnite, of the “Big Four” that must respond to this so as not to risk losing the affection of the general public. The PlayStation brand may find itself facing a tipping point: this is the first time in its history that it has faced the risk of losing such an important franchise. Its likely strategic reactions are difficult to anticipate.

The two biggest hits in this sense are Activision’s Call of Duty and Take-Two’s Grand Theft Auto, which are played by 55% and 41% of console players, respectively. Nothing else in the MIDiA Research game tracker comes close. Fortnite and Assassin’s Creed were played by 28% of console players, FIFA by 23%, and Spider-Man by 17%. Microsoft will have the most played title, and with it, console players’ content proposal deliberations will likely tilt in favor of Xbox.says Carol Severin of Media Research.

Making Call of Duty exclusive to Xbox — or even including it in Game Pass — could be a huge benefit for Xbox when these consumers choose between the Xbox Series or PS5.“, adds George Zhijaashvili of Omdia. The latter believes that Sony is suffering now.”Huge pressure to respond‘, but notes that his options are very limited because he doesn’t have the financial strength of Microsoft.

Sony has made a number of acquisitions recently, but these have been much smaller and have included studios that have already established relationships with them.He recalls, referring to hiring studios like Housemarque, Bluepoint Games, or even Firesprite.The acquisition of Activision Blizzard may force Sony to be bold with its subscription offering. To be clearer, we could see Sony include Day One releases as part of its subscription overhaul, in an effort to better compete with Game Pass.“If it did, such a response wouldn’t surprise Phil Spencer, anyway.

Sony’s only content response would be to buy a Take-Two, but that’s unlikelyCarol Severin adds.As of this writing, Microsoft’s market cap is $2.3 trillion. In terms of market capitalization, making an acquisition of US$68.7 billion would be equivalent to Sony (which has a market capitalization of US$146 billion) making the acquisition of US$4.4 billion. So there aren’t many big targets that Sony can target without overstepping its economic limits, compared to Microsoft.

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