One of the biggest companies in Big Tech would like to get bigger, which is precisely what another of the biggest businesses wants—because it would like to get even bigger too.
Put another way: Meta will be rooting hard for Microsoft in the days to come.
Microsoft said on Tuesday that it plans to buy Activision Blizzard for nearly $70 billion in cash, valuing the gaming company at a nearly 50% premium over its stock price on Friday. Activision’s stock price has suffered lately, driven down by misconduct allegations that CEO Bobby Kotick has seemed unable to quell. He’ll step down after the acquisition closes, leaving Microsoft with a new unit that encompasses mega hits like Call of Duty and World of Warcraft—new game franchises are as hard and expensive to establish as new movie franchises—and threw off an enviable $2.2 billion in 2020 profit. It’ll take sometime for this to wind through the accountants, lawyers and regulators: Microsoft expects the acquisition will close as late as July 2023.
For Microsoft, the deal can be read as Microsoft participating in what appears to be a coming wave of consolidation within gaming, adding to a long-established part of the company. A week ago, for instance, Take Two Interactive, the creator of Grand Theft Auto, said it would purchase Zynga for almost $13 billion. Microsoft already, of course, produces one of the most successful gaming consoles, Xbox, and owns one of the most popular games created in the last decade, Minecraft. (It bought the latter in a $2.5 billion transaction eight years ago.)
Here’s another read on Microsoft-Activision, which may or may not be totally correct: That purchasing Activision gives it a leg up in the race to create the metaverse, the annoyingly ubiquitous buzzphrase in tech over the last few months to describe the idea that we’ll soon want to exist in a boundless, three-dimensional digital realm. Immersive, multiplayer video games like Call of Duty and World of Warcraft are as close as anything is to a metaverse right now and buying up two at a discount might seem smart.
Microsoft has admitted to having designs on the metaverse, though it hasn’t had as much to say about it as some others. CEO Satya Nadella was fairly straightforward about the intentions around Activision in a press release announcing the tie-up: “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.”
Until now, Microsoft has seemed to indicate it might concentrate its effort on a virtual landscape for the workplace. It sounds pretty dull, but those working within the metaverse space generally think the office is one of the chief areas where we might actually start living more as digital avatars. It makes some sense: Everyone has been firmly out of the physical office for two years now. And would you rather clean yourself up and turn on your camera or put on a pair of virtual-reality goggles and let your customized virtual self—always presentable, always the way you want to appear—do the rest?
Whether Microsoft just wants to own Call of Duty or whether this is actually feeding into metaverse plans, the company’s truest intentions don’t really matter to Meta, the company once known as Facebook until CEO Mark Zuckerberg recently renamed it to make its metaverse-conquering goals very clear.
Fact or fiction, it’s in Meta’s best interests to paint the Microsoft-Activision deal as a metaverse play. Meta has had its hands tied by a recently renewed push by anti-trust regulators, who say the corporation has gained a monopolistic hold over social media. These efforts effectively make it impossible for Facebook to buy up anything new within the traditional social media space. (Case in point: Last month, British regulators told Meta it had to sell GIPHY, scuttling a $315 million deal by citing concerns that it would further stifle competition within digital advertising.)
Meta might be able to refocus the billions in cash on its balance sheet toward metaverse M&A—but only if it can prove that there are able competitors in the space actively on the hunt, too. To feel secure that regulators won’t quash future metaverse deals, Meta will want to point to thriving competition for those deals among other companies.
In other words, Meta wants deals like Microsoft-Activision to justify its own deals. To justify getting even bigger itself.
