Microsoft will pay 68.7 billion for Activision Blizzard

Activision Blizzard, which has been under fire from investors due to sexual harassment allegations and continuing leadership turbulence, has pulled the trigger on a 68.7 billion all-cash agreement with Microsoft, which includes the company’s net cash.

Activision Blizzard CEO Bobby Kotick has already been rumoured to resign amid ongoing SEC investigations and sexual assault scandals just at company, which employs nearly 10,000 people (over 2,000 current and former employees signed a letter last year calling the company’s responses to a discrimination lawsuit “abhorrent and insulting,” and over 1,000 employees signed a petition calling for Kotick’s resignation). According to the Wall Street Journal, Kotick was aware of sexual misbehaviour and rape charges at his firm for years but did nothing. Despite this, Microsoft has said that Kotick would continue to lead the company. Activision Blizzard will report to Phil Spencer, Microsoft Gaming CEO and Head of Xbox.

“As a business, Microsoft is dedicated to our mission for inclusiveness in every part of gaming, among both workers and gamers,” Spencer said this morning in a blog post, alluding to Activision Blizzard’s continuing turmoil. “We also think that creative achievement and liberty are inextricably linked to treating each individual with decency and respect.” This is a promise that we hold all teams and leaders to. We’re excited to bring our proactive inclusion culture to all of Activision Blizzard’s fantastic teams.”

It’s unlikely that the announcement of the transaction would relieve employees’ fears if Kotick continues at the lead. Employees at Activision Blizzard have walked out in protest of not just the continuing sexual misconduct allegations, but also the layoffs of quality assurance contractors for “Call of Duty.” Jessica Gonzalez, a Senior Test Analyst, resigned in late November after establishing herself as one of the company’s most outspoken internal advocates for change and emerging as a leader in the ABetterABK employees alliance.

“Your inactivity and inability to take responsibility is driving away brilliant personnel, and the products will suffer until you are removed from your role as CEO,” Gonzalez said in a resignation statement that she published on Twitter in Blizzard’s internal Slack. “This may seem harsh, but you’ve had years to improve the culture and assess where the firm is now.”

In an email to Xbox employees in November, Spencer said that he was “examining all elements of our partnership with Activision Blizzard and making continuing proactive modifications” in light of the company’s complaints. Spencer was questioned about his company’s connection with Activision Blizzard in an interview with the New York Times last week, before news of the deal became public.

“This isn’t about us as Xbox putting other businesses on a pedestal,” Spencer remarked. “Xbox’s track record isn’t perfect.” Microsoft recruited schoolgirl dancers for a party during the 2016 Game Developers Conference, exemplifying the same “frat guy” attitude that has generated so much trouble among women in the gaming industry. “That was a difficult time in Xbox’s history,” Spencer remarked.

According to Microsoft’s own press release, this transaction would make Microsoft the world’s third-largest gaming corporation by revenue, behind only Tencent and Sony. Mega-franchises such as “World of Warcraft,” “Call of Duty,” and “Candy Crush” are produced by Activision Blizzard, while Microsoft Gaming develops Xbox systems. Activision Blizzard titles will be included in Microsoft’s online gaming subscription Game Pass, which just topped 25 million customers. Activision’s games, on the other hand, have roughly 400 million monthly active users.

I’m on vacation today (lol) but if I were not I would be calling up some antitrust experts because Xbox buying Bethesda and now Activision sure seems like the type of horizontal merging that the DOJ frowns upon

— Jason Schreier (@jasonschreier) January 18, 2022

This isn’t Microsoft’s first multibillion-dollar purchase in recent memory. Microsoft revealed intentions to buy ZeniMax Media Inc., the parent company of Bethesda Game Studios and other publishers, in late 2020. Bethesda Game Studios and other publishers developed blockbuster titles including “Edler Scrolls,” “Doom,” and “Fallout.” As a result, the acquisition of Activision Blizzard by Microsoft may raise concerns in the Justice Department about Microsoft establishing a gaming monopoly. Meta, for example, is presently being sued for antitrust violations related to its burgeoning virtual reality company. However, this purchase may, paradoxically, increase Meta’s rivalry in the virtual reality industry.

“Gaming is the most dynamic and interesting area in entertainment today across all platforms,” said Satya Nadella, chairman and CEO of Microsoft. “It will play a vital role in the development of metaverse platforms.”

The deal, which values Activision Blizzard at 95 a share, is likely to conclude in 2023, but both Microsoft and Activision Blizzard’s boards of directors have given their approval.