A takeover that we did not see coming, and which nevertheless makes sense as the future success of Activision Blizzard was far from certain.
On January 18, 2022, there was an announcement as colossal as it was unexpected: Microsoft is buying Activision Blizzard. For 68,7 billion dollars – a record amount – one of the largest groups in the video game industry, publisher and developer of World of Warcraft, Call of Duty, Diablo and many other cult licenses, falls under the hands of Xbox, which had already hit very hard with the acquisition of Bethesda (ZeniMax Media) just a few months ago.
The initiative comes from Activision Blizzard, not Microsoft
Today, VentureBeat gives us some additional details on the progress of the negotiations between Microsoft and Activision Blizzard. According to the publication, it was not the Redmond firm that approached the Santa Monica firm for a takeover, but rather it was the latter that contacted the IT juggernaut to let it know that it was open to an acquisition.
The decision to find a buyer would have been taken in consultation with the leaders and the main investors in the capital of the group. Then everything went very quickly. Activision Blizzard contacted Microsoft in early November 2021 to let them know they wanted to be acquired.
A proposal on which Xbox immediately worked. The discussions were carried out quickly and by the end of the year, the details of the transaction were down on paper. The formalization was made public in mid-January 2022, for a sale process that should be finalized at the end of Microsoft's fiscal year 2023, that is to say in June of the year next. If the antitrust authorities don't get involved.
Development issues
But why did Activision Blizzard knock on Microsoft's door? After all, the group is in dazzling financial shape, still announcing revenue of €1,9 billion, operating profit of €808,3 million and net profit of €738,3 million. euros for the second quarter of 2021 for example. Call of Duty is one of the highest-grossing and popular franchises in video game history, and continues to attract gamers with both its free-to-play mobile version and its popular PC and console games. regularly at the top of game sales charts worldwide.
But internally, it seems that Activision Blizzard feels the tide is turning and does not believe it can approach the future calmly in the current state of the situation. Development costs for major video game productions have skyrocketed in recent years, and the group would struggle to find the resources to finance as many major projects as it owns major licenses. We have also seen Blizzard abandon StarCraft and Heroes of the Storm, while Activision's strategy is to focus exclusively on Call of Duty and abandon everything else.
In addition, Activision Blizzard has lost many talents, suffering from successive waves of departures that have left a void. Talent is a rare commodity in a very competitive market, and some experienced developers prefer to try their luck in smaller structures or launch their own project after years of working for a gigantic company that must constantly deal with the pressure of quarterly results imposed by the shareholders.
A certain potential, an uncertain future
Except that for investors, making profits is good, making record profits is even better. The health of a publicly traded company is also judged on growth prospects, and Activision Blizzard seems to be running out of ideas to generate money, too dependent on Call of Duty and King's mobile games.
Within the entity, it is traditionally Blizzard which is called upon for the creative aspect, to release quality games and regain the confidence of the players. But the image of the studio has deteriorated sharply with all players in the industry and despite the attractiveness of the brand, Blizzard is also struggling to manage the drain of talent. We also know that the development of Diablo IV and Overwatch 2 suffers the consequences, the two titles having seen their release largely postponed, just like that of the mobile title Diablo Immortal. Not to mention the bitter failure of Warcraft III Reforged.
Despite IPs that made video game history (Warcraft, Diablo, Starcraft) and an Overwatch that aimed to revolutionize the e-sports scene by drawing inspiration from the franchise system of traditional US sports, only Hearthstone seems to be emerging today. today. World of Warcraft still generates a lot of money thanks to its subscription system, but we have been witnessing a bloodletting of subscribers for several months, Final Fantasy XIV even threatening its status as the god of the MMORPG.
Activision Blizzard drags pans
The group drags balls that ended up breaking its relationship with the players, and even with its own employees. The management of the Blitzchung affair (a pro Hearthstone player who proclaimed his support for Hong Kong against China) had damaged Blizzard's image. But it is above all the repeated accusations of a toxic corporate culture under the background of cases of harassment and discrimination that have ended up undermining the love that players and employees could have for the company.
Especially since Activision Blizzard has found nothing better to control the complaints than to do everything to prevent the creation of a union, further stoking anger and causing staff strikes. Phil Spencer had also informed Xbox employees, in an email seen by Bloomberg, that he was "evaluating all aspects of our relationship with Activision Blizzard and making continuous proactive adjustments" in this affair. It was November 2021, and Activision Blizzard looked set to have its partnerships called into question if it didn't act soon.
In the hot seat, CEO Bobby Kotick (at the head of Activision since 1991) was also probably looking for a decent way out to leave the company, he who is singled out for having allowed to establish and for having continued a deleterious climate within the teams. What better way to do this than to conclude the biggest transaction in the history of video games and one of the biggest in the history of culture… But also to consolidate the position that was slowly beginning to be threatened by Activision Blizzard in the market thanks to the solid backing of Microsoft, which has the resources (and surely the ideas, given that it accepted a $68,7 billion takeover) to revive the machine and guarantee it a bright future. As a player, that's all you can hope for, especially if you've been rocked for decades by the games of the group's studios.
