Microsoft’s acquisition of Activision Blizzard: the battle for dominance in the Future Metaverse

source more metaverse articles When Microsoft announced its $68.7 billion acquisition of video game giant Activision Blizzard in January, there were some puzzling changes in the tech and gaming industries. , Microsoft’s chief executive, Satya, (Satya Nadella), said the acquisition of activision blizzard is to advances the strategy of Microsoft’s yuan universe, but Activision blizzard is the most famous is “the call of duty”, world of warcraft “and” candy crush legend “and other traditional games, rather than virtual reality, augmented reality and other technology related to yuan universe. On closer inspection, however, Microsoft is now more likely to be the leader in the metaverse and gaming. “Microsoft is in a very good position in the metaverse,” says Mark Moerdler, analyst at Bernstein. But I don’t think this acquisition is purely driven by a meta-cosmic strategy. Microsoft is also looking for depth and breadth in the gaming industry in a broader way.” Mr Mottler had expected That Microsoft might buy some smaller game studios, but decided “to make one big acquisition rather than a bunch of small acquisitions”. The activision Blizzard deal is Microsoft’s biggest acquisition under Nadella. The deal still needs approval from shareholders and regulators in the United States and elsewhere. The deal is not expected to close until June 2023. Microsoft made a point of highlighting the metaverse concept in its acquisition news. In fact, Between now and the closing of the deal, Microsoft is talking about a “dual-track model.” In an email to Microsoft’s roughly 181,000 employees about the acquisition, Mr Nadella said: “Gaming has been key to Microsoft since its inception. Today, games are the largest and fastest growing form of entertainment. As the digital and physical worlds converge, games will play a key role in the evolution of metaverse platforms.” There is no doubt that games are an attractive and lucrative industry. The global gaming market was worth $180.3 billion in 2021 and is set to grow to $218.8 billion by 2024, according to market research firm Newzoo. EMarketer estimates that 2.96 billion people worldwide played digital games last year, whether on consoles, computers or mobile devices. That number will reach 3.09 billion by 2022, about a third of the planet’s population. Activision Blizzard and metaverse Microsoft made its first foray into video games in 2001 with the release of its Xbox console. Sales of the Xbox, now in its fourth generation, rose 14% in Microsoft’s fiscal third quarter. Microsoft’s games division, headed by Phil Spencer, is made up of 23 game design and software studios and hundreds of games. Its Game Pass monthly subscription service has attracted more than 25 million users, while nearly 10 million use Microsoft’s Xbox cloud gaming service. While Activision Blizzard is not considered a major player in the metaverse industry, the definition of what the metaverse are is still a work in progress, and Activision Blizzard’s game offerings are a good indication of how the company will participate in the metaverse. In 2004, Blizzard released World of Warcraft. Blizzard was still an independent game studio until it merged with Activision in 2008. Mike Sepso, chief executive of Vindex, an esports infrastructure platform, was an executive at Activision after the blizzard merger. “It’s a virtual world,” he says of World of Warcraft. “Your avatar can walk with friends, build clans, and fight together.” Seppso also points to several other games that incorporate meta-cosmic elements, including Loblus, Fortnite, Second Life, and Microsoft’s Minecraft. On these platforms, players can teleport between many games, create virtual social Spaces, even attend concerts, and buy virtual items to enhance the experience. Most of these games require virtual reality headsets and game consoles. That’s good for Microsoft, which already offers hardware like Hololens and the Xbox. The virtual worlds in these games may not be as good as metaverse boosters predict. In their view, users in the metaverse will be able to hold meetings, see doctors, take vacations and engage in all kinds of business activities in an immersive manner through mixed reality technology. The addition of Activision Blizzard’s gaming capabilities will further enhance Microsoft’s already well-positioned position in software, cloud computing, gaming and virtualization. In an interview a week before the deal was announced, Mr Spence said: “I am absolutely convinced that the meta-universe is an extension of the gaming business.” Microsoft’s game developers, for example, are envisioning virtual work environments that use their experience in video games to bring people together online and collaborate on tasks. However, the metaverse will be popularized by Generation Z and their descendants. They have grown up entirely in the digital world and are especially familiar with games. According to a recent study of Gen Z gamers by RazorFish and Vice Media Group, they spend twice as much time with friends in the metaverse as they do in real life. More than half said they wanted to experience how to make money in the metaverse. 33 percent are looking for a career development experience. Over the next five years, 20% of their entertainment budget will be dedicated to in-game shopping. A pullback in tech stocks Microsoft was one of the strongest technology companies after its third-quarter earnings report, even as tech stocks were experiencing a pullback. The company’s strength lies in strong demand for its cloud computing services and software capabilities, which are also core components of the metaverse and gaming businesses. Activision Blizzard reported lackluster first-quarter results, largely due to weak demand for the latest iteration of its Call of Duty franchise. However, a new entrant, Warren Buffett, said at Berkshire’s recent shareholder meeting that he has been increasing his stake in Activision blizzard. It’s a merger arbitrage play, because he believes Microsoft’s deal to buy Activision Blizzard will be successful. Berkshire hathaway currently owns about 9.5% of Activision blizzard. Activision Blizzard’s shares are now 20% below Microsoft’s $95 a share offer, as share prices in the tech sector have fallen. Clay Griffin, an analyst at MoffettNathanson, said the weaker-than-expected call of Duty numbers were bad for Activision blizzard’s fundamental story. If the deal falls through and Activision Blizzard is forced to remain independent, the company’s stock price could fall to the mid-60s. But he agreed that such a scenario was unlikely. “Sometimes I see an arbitrage opportunity and execute it,” Buffett says. Sometimes it looks like the odds are in our favor, but we end up losing money in that company, quite a lot of money. It depends on what happens when the deal fails.” Microsoft and Activision Blizzard declined to comment. Future ownership In the meantime, the fate of Activision Blizzard’s current chief executive, Bobby Kotick, is uncertain. Mr Kotick was part of two separate investigations launched last year by the SECURITIES and Exchange Commission and the Us Department of Justice into Activision blizzard’s handling of gender discrimination and sexual harassment. Media reports in November alleged that Kotick mishandled allegations of sexual harassment. This aspect of Activision Blizzard also caught Spence’s attention before the deal was announced. In November, as news of the situation was gathering, Spencer told employees that he was “deeply disturbed and troubled” by the horrific events and practices at Activision Blizzard, and that Microsoft was “reviewing all aspects of our relationship with Activision Blizzard and making proactive adjustments,” according to media reports. But in fact, around the same time, Spencer and Microsoft management began discussing an acquisition deal with Activision. “When this deal closes, Microsoft will be the third-largest gaming company in the world by revenue, behind Tencent and SONY,” Mr Spence said in a conference call with analysts after the deal was announced in January. “Until then, Activision Blizzard and Microsoft Games will continue to operate separately,” he wrote on his official blog. Activision Blizzard’s business will report back to me after the deal closes.” “In most acquisitions, senior management leaves,” says Mr Mottler. That’s more likely in this deal.” Activision Blizzard has a huge library of games, close to 400 million monthly active players, and many of them are already spending money in virtual worlds. So there is little doubt about the logic of the deal, and no one doubts Mr Spencer’s ambition. “This deal addresses several issues for Microsoft,” Mr. Seppso said. First, it will add a significant number of quality games and player bases to the Game Pass business in the short term. In the long run, these games can expand into the metaverse. This will put Microsoft in an enviable position as to who will dominate the metaverse.”