Microsoft to acquire Activision Blizzard, the embattled Call of Duty, Warcraft publisher

Microsoft to acquire Activision Blizzard, the embattled Call of Duty, Warcraft publisher, for $68.7 billion

Microsoft to acquire Activision Blizzard

Microsoft Gaming will acquire Activision Blizzard — the embattled video game publisher behind such hit franchises as Call of Duty, Warcraft, Overwatch and Candy Crush — in a $68.7 billion deal, the company said in a blog post Tuesday.

The announcement from Microsoft Gaming CEO Phil Spencer comes as Activision Blizzard faces a series of crises: In July, the publisher was sued by California’s Department of Fair Employment and Housing; the state agency’s suit alleging widespread gender-based discrimination and sexual harassment at the company. Activision Blizzard also faces a U.S. Securities and Exchange Commission investigation, as well as a class-action lawsuit instigated by shareholders and an unfair labor practices complaint filed by workers and the media labor union Communications Workers of America. The publisher’s CEO, Bobby Kotick, has faced repeated calls by employees to step down.

Following the news of the acquisition, Microsoft CEO Satya Nadella announced that Kotick will stay on as CEO of Activision Blizzard, reporting to Microsoft Gaming CEO Phil Spencer. In an email sent to Activision Blizzard employees Tuesday and shared with The Washington Post, Kotick wrote he would stay on as CEO “with the same passion and enthusiasm” he had when he started the job in 1991. He wrote that the deal will close sometime by June 2023, pending regulatory approval, and until then, the company will stay autonomous from Microsoft.

“As a company, Microsoft is committed to our journey for inclusion in every aspect of gaming, among both employees and players,” Spencer in Tuesday’s blog post announcing the deal. “We deeply value individual studio cultures. We also believe that creative success and autonomy go hand-in-hand with treating every person with dignity and respect. We hold all teams, and all leaders, to this commitment. We’re looking forward to extending our culture of proactive inclusion to the great teams across Activision Blizzard.”Microsoft’s acquisition of Activision Blizzard is more than four times bigger than the previous record sum paid for a video game publisher set earlier in January when Take-Two Interactive announced plans to purchase mobile game maker Zynga for $12.7 billion. In 2020, Microsoft paid $8.1 billion to acquire ZeniMax Media, the parent company of popular video game developer Bethesda Softworks.

Activision Blizzard will become the most expensive acquisition for Microsoft today, beyond its gaming additions. In 2016, Microsoft paid $26.2 billion for the professional networking site LinkedIn. For context, 10 years ago Disney paid $4.05 billion to acquire the rights to the Star Wars franchise via Lucasfilm.

Last week, in an interview on the New York Times podcast “Sway,” technology writer Kara Swisher asked Spencer about the sexual assault allegations in The Wall Street Journal’s report on Activision Blizzard.

“I always feel for people working on any team, my own teams, other teams. I think people should feel safe and included in any workplace that they’re in,” Spencer said on the podcast. “I’m saddened and sickened when I hear about workplace environments that cause such distress and destruction of individuals and teams.”

Microsoft to acquire Activision Blizzard, the embattled Call of Duty, Warcraft publisher

Last November, Spencer wrote an email to staff explaining that Microsoft was reevaluating their partnership with Activision. Spencer told Swisher that Microsoft had changed how the company partners with Activision Blizzard but didn’t go into any details. Spencer went on to say that “Xbox’s history is not spotless” and he didn’t want to chastise other gaming companies.

“This isn’t about, for us as Xbox, virtue-shaming other companies,” Spencer said. “If I can learn from them or I can help with the journey that we’ve been on on Xbox by sharing what we’ve done and what we’ve built, I’d much rather do that than get into any kind of finger-wagging at other companies that are out there.

In the Tuesday blog post announcing the acquisition, Spencer also shared that Game Pass, Microsoft’s video game subscription service, had surpassed the mark of 25 million subscribers. In a news release, Microsoft explicitly connected the acquisition to its Game Pass subscription offering, noting that the purchase will set in motion plans to release Activision Blizzard games on the service.

Michael Pachter, a Wedbush Securities analyst who focuses on the video game industry, noted that the deal is significantly larger than what would be warranted given Activision Blizzard’s closing stock price last week at $65 per share. The stock is up nearly 30 percent Tuesday after the market opened.

“Microsoft gets $8 to 9 billion of revenue and $3 billion or so of annual free cash flow, plus a ton of great intellectual property and great studios," Pachter said. “They might decide to stop offering games on PlayStation, which could raise antitrust issues, but other than that, I think the deal goes through.”

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