By Jim Lundy
Microsoft’s acquisition of Activision has sped up the race to the metaverse
The ink isn’t even dry on the deal, yet Microsoft has now put everyone on notice that it is completely focused on winning in the upcoming war for the metaverse. Buying Activision for $68B in cash is significant – not only for all the gaming revenue that Activision brings to the table but more importantly for all the developers that Microsoft can now leverage to build out it’s multiple metaverse communities. This blog discusses the rationale behind the Microsoft and Activision deal.
Why Is Microsoft Buying Activision – Countering Facebook
The reason Microsoft bought Activision is that it needs more talent and more resources to build out its content offerings in game titles – and make money doing it. Activision provides all those resources and a solid revenue stream to make the deal viable. Microsoft can focus on the Metaverse and potential revenue downstream, as the enterprise adoption is still 3-5 years away.
The biggest reason we think Microsoft is doing this deal is to stop Facebook ambitions in the Metaverse before they even get started. Facebook has no real play with the million regular video game players, because it has a general purpose metaverse that still needs a lot of building and gamification to attract users.
The Gaming Play
The biggest reason that Microsoft is buying Activision is the need for content – and that is exactly what Activisiton brings to the table. Call of Duty is one of its biggest gaming brands, and that may be why there will be some antitrust review. However, given Sony’s action this week to buy Bungie, the antitrust review may be quick.
Sony Counters Microsoft and Buys Destiny Gaming Unit Bungie
It comes as no surprise that with a threat to its Playstation gaming business, Sony countered Microsoft’s Activision purchase by buying Bungie for $3.6 Billion. While it has a much lower price tag than the Microsoft/Activision deal, it is the Game Franchise Destiny that is currently multi-platform. We’d also note that Bungie was owned by Microsoft for a few years before being spun out. It also developed the highly popular Halo game that was popularized on the Xbox.
The Metaverse Play
Clearly, with close to 800 million gamers in the world, the metaverse is essentially a game that you can build. Buying Activision gives Microsoft a metaverse development platform that is far superior to what Facebook must now organically develop.
Apple Waits In the Wings to Win With Gaming
We can’t ignore the fact that iOS from Apple has become a very popular gaming platform. Apple does collect 30% from gaming firms that sell their games or in-app purchases in the iTunes App Store. That has not gone unnoticed by Microsoft and in reality, iOS is a threat to Xbox.
Aragon feels that mobile gaming is here to stay and while the PS5 and Xbox are very popular, PC Gaming and Mobile gaming will demand that gaming be more open and not locked to specific platforms. This is where the metaverse openness comes into play.
Bottom Line
Microsoft is paying a lot for Activision but, in turn, it is getting a studio that can pump out games that keep people playing. That is key because keeping new editions of a current game updated is what keeps the players around. Expect to see more M&A in gaming as platform providers race to own the game developers. For the enterprise, expect to see Microsoft leverage the Activision platform