Activision Deal: Why Is Microsoft Paying $68 Billion for a Games Company?

Why Microsoft is paying more for a video game company than it paid for LinkedIn, Skype, Github, and Nokia combined.

Microsoft is paying more for a video game company than it paid for LinkedIn, Skype, Github, and Nokia combined.

(Photo: Altered by The Quint)

Microsoft, on Tuesday, announced that it will acquire video games publisher Activision Blizzard for an eye-watering $68.7 billion. This will be the tech giant's biggest acquisition ever – and the largest deal in gaming history.

To put it into context, here are some of Microsoft's other big purchases:

• LinkedIn – $26.2 billion

• Skype – $8.5 billion

• Bethesda (a big gaming studio) – $7.5 billion

• GitHub – $7.5 billion

• Nokia – $7.2 billion

Microsoft is paying more for a video game company than it paid for LinkedIn, Skype, Github, and Nokia combined.

This deal might be a bit of a head-scratcher for those unfamiliar with Activision Blizzard. However, here is a list of reasons why Microsoft is willing to shell out so much money.

Activision Is the 5th Largest Gaming Company

Activision Blizzard is a massive holding company which has several game studios and publishers under it. It also has nearly 400 million monthly active players in 190 countries, and three billion-dollar franchises.

In 2020, it earned 8.1 billion dollars in revenue, making it the fifth largest gaming company in the world.

After this deal, Microsoft, which currently holds the fourth place, will become the world’s third-largest gaming company by revenue, behind Tencent and Sony.

The acquisition, and the influx of revenue and players that come with it, will give Microsoft a boost against Japanese competitors Sony and Nintendo.

Sony's PlayStation line of consoles has generally proved to be more successful than Microsoft's Xbox, but this deal might help change that dynamic.

In fact, Sony has lost $20 billion in market value since this acquisition was made public, according to Bloomberg.

Xbox Game Pass

Think of the Xbox Game Pass as the 'Netflix of games.' It is a subscription service where, for a monthly fee, you have access to a large library of games to play, as opposed to buying individual copies.

This service is rapidly gaining popularity and already has over 25 million subscribers. It is also a source of constant revenue for Microsoft.

The acquisition of Activision Blizzard will bring popular franchises with it, including Warcraft, Diablo, Overwatch, and Call of Duty. When these are added to Xbox Game Pass, they are likely to give a massive boost to Game Pass's subscriber-base and Microsoft's revenue.

Gateway to the Metaverse

Apart from its office and conferencing software, Microsoft also sees gaming as a gateway to the metaverse.

Online multiplayer games, like Minecraft and Roblox, can already be considered a primitive version of the metaverse – people gathering in virtual spaces, with virtual avatars, to do things together.

This is part of the reason why it has bought several gaming studios with online player bases in the past few years, like Mojang and Bethesda.

Virtual reality headsets have also seen widespread use in video games.

"Today, (gaming) is the largest and fastest-growing form of entertainment, and as the digital and physical worlds come together, it will play a critical role in the development of metaverse platforms," Microsoft CEO Satya Nadella said in a statement.

The Mobile Gaming Jackpot

One of Activision Blizzard's subsidiaries is King Entertainment, which is responsible for the smash-hit mobile game franchise Candy Crush. The Call of Duty franchise also has a popular mobile game under its name.

Since Microsoft has a negligible presence in mobile gaming, this buyout will let it reap the benefits of the fastest growing segment in the industry.

However, Microsoft isn't the only one who wants a piece. Recently, game company Take Two Interactive announced its plans to buy Zynga (which makes mobile games like Farmville) for 11 billion dollars.

(With inputs from Bloomberg.)