Everything you need to know about the Microsoft Activision Blizzard takeover
Takeovers are nothing new in the video game industry. We’ve seen countless studios dissolve and reform in the belly of major gaming publishers, otherwise known as AAA developers, but no studio giant has ever tried to bite off this much. Microsoft wants Activision Blizzard, the studio behind the money-printing Call of Duty franchise and king of massive multiplayer games (MMOs) World of Warcraft.
The acquisition has been ongoing for quite some time now, with the news having dominated the gaming world throughout 2022. Naturally, a purchase of this size isn’t as easy as it looks. There’s a lot of updates constantly trending online on this but don’t worry, we’ve got all the beats covered to keep you up to date on the potential merger. We’ll be keeping this deep dive updated too as things develop, so be sure to check back whenever things get confusing.
Before diving in, it’s worth clarifying that Activision Blizzard is a holding company, and houses numerous game studios, as well as the company that lent its name to the holding title, Blizzard Entertainment. When Activison merged with Vivendi Games in 2008—Blizzard’s previous owner—the holding company Activision Blizzard was born, one of the first gaming mega corps of its time. Thus Blizzard entertainment still exists and were the main team facing the 2021 allegations.
Activision Blizzard’s countless accusations of sexual misconduct and sexism in the workplace
The story begins with a studio struggling to manage its employees and put an end to a toxic and sexist work environment—a knife in the side of the company that ultimately set the acquisition in place. However, this shouldn’t come as a surprise to anyone, given the gaming industry’s reputation when it comes to problematic creators and missed opportunities for representation.
The news broke in July 2021, when the state of California filed a lawsuit against the game developer after a two-year investigation. What the state found was a “frat boy” culture running rampant in the company. Female employees frequently faced sexist abuse as well as severe employee inequality.
This behaviour culminated in the news that longtime Blizzard developer Alex Afrasiabi had a “Cosby suite”—a dedicated hotel room for boozing, that made reference to the convicted rapist Bill Cosby. On top of this, it was revealed that a female employee committed suicide while on a company trip with an unnamed “male supervisor.”
Things were not looking good for the California-based team. 2021 saw Blizzard veterans fleeing the sinking ship, while others were ousted from the company as the allegations began to mount. And then, in November 2021, it was revealed that CEO Bobby Kotick was well aware of the allegations and rumours floating around at the studio, and had done nothing to stop it.
On 3 February 2023, Activision Blizzard paid $35 million to the Securities Exchange Commission to settle charges involving the company’s violation of workplace misconduct reporting rules and whistleblower protections. Essentially, it didn’t have the appropriate structure in place to accurately collect and respond to internal complaints and discourse over the misconduct allegations as they were happening. While the settlement is massive, the organisation has chosen to accept no blame for what transpired. Classic.
Microsoft announces $70 billion bid to buy Activision Blizzard
Needless to say the outlook was not looking good for the developer. Once considered the benchmark for quality and passion within the industry, Blizzard’s good name had been stained by the news.
On 18 January 2022, Microsoft became the failing company’s knight in shining armour. According to The Wall Street Journal, the technology corporation put forward a bid to buy Activision Blizzard for a staggering $70 billion, an acquisition that would put Microsoft in third place for largest gaming company “in revenue,” behind only Tencent and Sony.
The purchase would be a monumental merger for Microsoft—who also houses one of gaming’s most famous studios, Bethesda Softworks—especially given that it would own another of the industry’s most successful franchises, Call of Duty. It’s an opportunity for Xbox to take back the throne and for Blizzard to clean up its act.
Despite approval from Activision’s board of shareholders, it’s not going to be an easy purchase, with flags raising constantly on the legality and ethicality of the buy for the industry.
The FTC, British regulators and gamers are standing up to the Microsoft purchase
Despite the game developers having reached an amicable agreement, the deal has been flagged to numerous government bodies designed to prevent monopolies and unfairness within the industry. Some gamers too are collectively organising in hopes to block the deal—seemingly in fear of a gaming market dominated by one team. Think of the Microsoft purchase as the Ticketmaster of the gaming industry.
Let’s start with the Competition and Markets Authority, better known as the CMA. This UK body has conducted an investigation into the merger and on 8 February 2023, published a summary of its findings. This research will allow the body to begin to try and block the joining of the studios, in the name of the consumer and for the allowance of fair competition to take place. It was suggested in the findings that Microsoft may have to sell off other parts of the company (like the Call of Duty part) before the deal can go through.
Kotick has since reacted to these claims in as amicable a way as possible… The Activision Blizzard CEO has claimed that the UK will become “death valley” if the deal is blocked by regulators. What he means is that the country has no chance of becoming “the next Silicon Valley” if it continues to block the deal. How these things are related is beyond me.
It’s not just UK regulators that have a problem with the deal though, as the Federal Trade Commission (FTC), a regulating body from the US, has also flagged it as potentially harmful to competitors. The organisation has filed a lawsuit against Microsoft and is conducting its own investigation into the deal, with a hearing due to take place on 2 August.
As previously mentioned, gamers too are trying to block the tech giant from absorbing the industry. Reported by Bloomberg, the complaint filed on 20 December 2022 saw a group of “video gamers” concerned that the “merger may substantially lessen competition or tend to create a monopoly.” The suit is being filed thanks to the The Clayton Antitrust Act of 1914, a law that gives Americans the right to sue companies over anti-competitive behaviours.
Microsoft’s beef with Sony comes to a head
The Japanese tech giant behind the PlayStation, Sony, isn’t pleased with Microsoft’s attempts at purchasing Activision Blizzard and has been at the forefront of discourse over the buy. The main concern centres on the fact that it might lose access to Call of Duty, a franchise that has made over $27 billion in its lifetime.
As arguments intensified, Microsoft relented and accepted that yes, Call of Duty is an essential game to both platforms. CEO of Xbox, Phil Spencer confirmed back in January of last year that the company has no intention of keeping CoD away from PlayStation.
As part of getting the deal approved Microsoft have offered a 10 year deal to Sony, ensuring the safety of the franchise for at least that time. Microsoft is desperate to show that it doesn’t plan to restrict CoD from Sony, despite the Japanese company’s worries.
While that’s all well and good, the two industry leaders can’t help continuing to butt heads, with Spencer coming onto the Second Request podcast in December 2022 to say that Sony want to grow at the expensive of Microsoft, elaborating that “Sony is leading the dialogue around why the deal shouldn’t go through to protect its dominant position on console, so the thing it grabs onto is Call of Duty.”
Activision Blizzard CCO also took to Twitter to highlight the success of Sony’s The Last of Us television adaption—proof in her eyes that the FTC need not to protect the market leaders, and that Sony’s position will be fine without its help. It was a bizarre move but one that the developers are hoping will raise positive publicity for the side of the acquisition.
Both sides are doing their best to garner support for their causes, with Sony going as far as to accuse Microsoft of “harassment” as the two behemoths fight it out in an EU court battle. The claims of harassment come due to Microsoft’s attempts at getting its hands on internal documents for discovery, a process in court that entitles parties to each other’s insider documents and emails. In short, Microsoft says its rival is stalling in the court while Sony pleads harassment at what is a very normal proceeding.
The bitter proceedings march on. The case is sprawling and is likely going to take years to resolve as independent bodies and regulators weigh in on the matter. The scope of this merger should be clear given that the entire western world has managed to get involved. Will Microsoft succeed in swallowing the industry whole?
