Rob: It's fair to say that once an industry hits a certain level of consolidation, the only big deals left to do are the ones that are so enormous that they were almost inconceivable before they were announced. "Microsoft Buys Activision" was not a headline I expected at the start of this year, not because I didn't think a company like Microsoft would be looking for more studios and franchises to bring under its banner, but because the price a company like Activision would command seemed impossibly high.But now we have a number and it's $70 billion, with the expectation that the deal will close early in 2023. That means everything Blizzard makes, the entire Call of Duty franchise, and King's mobile portfolio are now part of Microsoft's growing gaming division. As we noted, it also means that Microsoft is acquiring a nesting-doll of scandals that have smashed both Activision's and Blizzard's reputation as well as that of their leadership, plus ongoing conflict with labor especially at Activision's Raven studio.There's another element to this as well, however. Part of the merger process from here involves getting approval from the Federal Trade Commission. Now in recent years, the FTC has been a set of rubes with rubber stamps for mergers and acquisitions. This was typified by Facebook's now infamous acquisition of Instagram back in 2012, where the FTC effectively signed-off on Facebook's buying a growing rival and consolidating its hold over social media. The FTC (and in the telecoms sector, the FCC as well) has been nothing but a minor speed bump for all kinds of industry-consolidating mergers over years.
“It's fair to say that once an industry hits a certain level of consolidation, the only big deals left to do are the ones that are so enormous that they were almost inconceivable before they were announced.”
Why spend time building an expensive video game when you can pay a fraction for the cost of hosting it? Now, imagine how such a mentality might influence how games are made in a world where Game Pass has been around since publishers are green lighting their projects.And while we’re broadly on the same page about this, to play devil’s FTC advocate for a moment, isn’t it also the case that, in many ways, video games are more competitive than they’ve ever been? We do not exist in a world where one company dominates the landscape and others pick up the scraps. Nintendo, Microsoft, and Sony are all doing exceptionally well, and that was before a COVID-driven boost for additional distractions inside our homes. That’s the kind of shortsighed nonsense that prompts regulators to make poor choices, obviously. It can be true and also not the truth. But I suspect that’s how it’ll actually play out.It’s also telling that much of the public reaction—including a lot of people in the media, frankly—has been to wonder less about whether this acquisition is part of a broader negative trend that’ll have unforeseen ripple effects in and outside of games and simply a vehicle to wonder how a company like Sony will respond. “I mean, boy, they gotta buy Square Enix now, right?” is the vibe that I’m seeing on social media and elsewhere and it frankly sucks.Bloomberg’s Jason Schreier reported this morning that one of the sentiments from employees at Activision Blizzard is a “determination to keep organizing.” Let’s hope so, because while a union effort under Activision Blizzard would have been a big deal, a union effort under Microsoft—success or failure—would be even bigger. They should keep going.
“It’s also telling that much of the public reaction—including a lot of people in the media, frankly—has been to wonder less about whether this acquisition is part of a broader negative trend that’ll have unforeseen ripple effects in and outside of games and simply a vehicle to wonder how a company like Sony will respond.”