Microsoft blockbuster takeover upends video game market

The deal will bring some of the world's most famous games into Microsoft’s possession.

PARIS (AFP) - Microsoft catapulted itself into the big league in one of the world’s most lucrative markets on Tuesday by announcing a $69 billion deal to take over video game maker Activision-Blizzard -- the biggest acquisition in the sector’s history.

The deal will bring some of the world’s most famous games into Microsoft’s possession, including "Call of Duty", "Candy Crush" and "Warcraft", and make it the third-largest gaming company in the world, behind only Sony and Tencent.

It comes just days after the sector’s previous record was smashed by Take-Two’s $12.7 billion takeover of mobile game specialist Zynga.

Analysts say the blockbuster deals show just how pivotal gaming is becoming.

"Brands, musicians, and IP holders are increasingly reaching their audiences via games versus the other way around," said Shanti Bergel of the Transcend Fund.

"Against that, Microsoft is building out an ambitious cross-platform interactive entertainment strategy and needs hit gaming content to power it."

 

- Gaming in the cloud -

But millions of gamers are watching nervously to see if the deal gets past regulators, fearing that Microsoft could try to make an unparallelled portfolio of games playable only on its Xbox consoles -- at the expense of rival Sony’s PlayStation 5 in particular.

"If Call of Duty and all Activision-Blizzard games become Microsoft exclusives, it puts enormous pressure on Sony and all those who want to do ‘cloud gaming’ like Google, Amazon and Tencent," Charles-Louis Planade, a video game expert at Midcap Partners, told AFP.

Cloud gaming allows players to get access to games without having to download huge chunks of data.

Pushing cloud gaming along with mobile platforms and gaining a bigger foothold in Asia are all part of Microsoft’s thinking, according to Niko Partners, which specialises in the gaming sector in Asia.

"The combination of HD console games for Xbox being available via cloud for mobile and other devices plus Activision’s dedicated mobile games development will support Microsoft’s goal of platform, IP and geographic expansion," said Niko Partners in a note to clients.

Microsoft, which had already opened its wallet in 2020 to fund a $7.5 billion takeover of Bethesda, makers of "The Elder Scrolls" and "Fallout" series, gets another bonus from all these acquisitions.

"Following the acquisition, Microsoft will gain a dominant position in esports, a growing theme where it has struggled to make a mark in the past," Rupantar Guha of GlobalData.

 

‘Mushrooming popularity’ -

All eyes will now be on the responses of Microsoft’s major rivals, with analysts pointing out that tech giants like Google and Amazon have huge ambitions but only very slim game portfolios.

This makes more takeovers and acquisitions likely.

"There are still some interesting players," said Laurent Michaud, an analyst specialising in the video game industry.

Electronic Arts, which makes "Fifa" and "The Sims" among others, could be a target for the US giants, he suggested.

And Sony might want to pick up game makers like Bandai Namco or Konami.

French firm Ubisoft, which counts "Assassin’s Creed" among its most popular creations, could also be in the sights of the giants, according to analyst Planade.

The amounts being paid for game makers may seem exorbitant, but the value of the companies is underpinned by the way gaming "is viewed as an integral part of our future social and digital lives", said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

"The mushrooming popularity of this hobby is why Microsoft has delved into its very well-lined pockets and splashed out on the gaming production giant. From an outside perspective, the logic is fairly flawless."