Microsoft took Wall Street by surprise when it announced it was buying Activision Blizzard in an all-cash deal valued at $68.7 billion. Not only is this the largest in the software maker’s history, but it’s also the biggest tech deal in history. This is going to have a massive impact on the world of e-gaming and the burgeoning metaverse.
The blockbuster acquisition gives Microsoft, the name behind Xbox, access to epic games like Call of Duty, World of Warcraft, and Diablo. These will join the company’s own virtual worlds of Minecraft and AltspaceVR.
It also gives Microsoft a very strong presence in the mobile gaming arena through Activision’s mobile gaming arm King. The King franchise includes Candy Crush, Farm Heroes, and Bubble Witch, which draw in around 245 million monthly active users across web, social media, and mobile platforms.
What Does This Acquisition Mean for the Gaming Sector?
With this one move, Microsoft gains a significantly larger foothold in the $180-billion gaming industry, becoming the third-largest gaming company by revenue, behind Tencent and Sony.
This isn’t Microsoft’s first foray into expanding its gaming universe. In March 2021, it paid $7.5 billion for ZemiMax, the parent company of Bethesda Softworks. This gave it access to big, well-known gaming franchises like DOOM, Wolfenstein, Fallout, and Elder Scrolls.
This acquisition is an excellent move for Microsoft. In 2020, the global gaming industry reached a record $173.7 billion, boosted by the pandemic and work-from-home environment. That momentum is expected to continue over the next five years, with the global gaming market reaching $314.4 billion by 2026, expanding at a compound annual growth rate (CAGR) of 9.64%. That’s more than the global film industry and North American sports industries combined.
Moreover, the acquisition is expected to give Microsoft a boost over Sony. A console war could see Microsoft make games like Call of Duty, World of Warcraft, and OverWatch exclusive to Xbox. That would make a big dent in Sony’s bottom line. Call of Duty accounted for two of the three best-selling games on PlayStation in 2021.
How Does Activision Better Position Microsoft for the Metaverse?
In addition to gaming though, the acquisition gives Microsoft the building blocks for the metaverse, a term used to describe cloud-based, virtual 3D environments where users can gather and interact.
Of the Activision acquisition, Satya Nadella, Chairman and CEO of Microsoft said that “gaming is the most dynamic and exacting category in entertainment…and will play a key role in the development of metaverse platforms.”
While the metaverse is not yet a fully functioning reality, Microsoft has, over the years, built up what could arguably be called “the largest breadth and depth of functionality” required to deliver the metaverse platform.
As a provider of cloud-computing tech, Microsoft is poised to benefit from supporting numerous metaverse platforms, with Nadella noting that the Activision deal shows “there won’t be a single centralized metaverse.”
This puts Facebook, a company that changed its name to Meta late last year, on notice.
In an age where the speed, scale, and scope of technology is expanding at an unprecedented rate, it’s imperative for even the biggest names to assert themselves and take aggressive positions in the future of the internet, 3D, artificial intelligence (AI), virtual reality (VR), and augmented reality (AR).
Microsoft does that with this bold acquisition.
Investing in Video Games with HERO ETF
Looking to invest in video games? Consider Canada’s first esports and gaming ETF, the Evolve E-Gaming Index ETF (HERO ETF). HERO ETF is an index-based exchange-traded fund that invests in the leading video game companies across the globe. To learn more about HERO ETF, please click here: https://evolveetfs.com/hero/.
Stay updated with the latest information on gaming and related industries by signing up for our weekly newsletter.
*Note: All figures in USD, unless otherwise mentioned