Will Microsoft Get its Activision Deal?

We live in an era of mergers and acquisitions. When times get hard in the global economy, businesses start eating each other in order to survive. A well-chosen acquisition can be the difference between prospering or going under.

We don’t think Microsoft was ever in any danger of going under – it’s been around for long enough and has big enough reserves – but it believes it’s spotted the perfect acquisition in the shape of Activision Blizzard. Activision Blizzard agrees with Microsoft’s assessment and is happy to sell. If this sounds like old news to you, you’re right – the $69bn deal was first touted and agreed to by all parties in January 2022.

We’re now at the end of 2022, and the deal isn’t complete. Unfortunately for Microsoft and Activision, it might be doomed never to happen.

A deal of this size was always likely to attract the attention of the Federal Trade Commission in the United States of America, and so that’s proven to be the case. The FTC has concerns about the antitrust implications of the acquisition – and it’s not the only regulatory body that has reservations.

Cornering the market

The gaming sector gets bigger every year. It got a shot in the arm (no pun intended) in 2020 when everybody was stuck at home during the pandemic because more people turned to video games than ever before. It got a second shot in the arm at the end of that accursed year with the launch of the latest generation of PlayStation and Xbox game consoles.

A new era of gaming has begun. Modern Triple-A status games have the same budget as blockbuster movies and make just as much money. In fact, “Grand Theft Auto V” by Rockstar Games is the highest-grossing entertainment product in history.

The companies that make successful games are worth more now than they ever have been before – and that makes them attractive to investment firms and big tech companies.

There are obvious reasons why Microsoft would want to buy Activision Blizzard. Although Microsoft makes games of its own, just as it has for three decades, its games don’t tend to smash hits. That’s an issue, given that Microsoft also makes the Xbox games console. Activision Blizzard, on the other hand, makes the “Call of Duty” franchise of war-themed video games.

Each new “Call of Duty” release is a surefire hit, thanks to the millions of people worldwide who buy and play the games. When the PlayStation 5 launched, it was paired in the box with the latest version of “Call of Duty,” which was briefly exclusive to the console and optimized for it.

The “Call of Duty” name is so familiar that players buy anything that its name and logo are attached to. All of the video games sell well, no matter how they’re reviewed. The mobile game is almost as popular as console games. There are even “Call of Duty 4” and “Call of Duty:

Warzone” casino games, and if you’ve been to a casino sister site recently, you might have seen them featured on its front page because of their popularity. Given their simplicity compared to mobile and console games, casino games are almost a license to print money. When they do, Activision profits. It’s often said of casinos that the house always wins. In this case, Activision Blizzard is the house.

If Microsoft were to get hold of Activision Blizzard, it could ensure that all future “Call of Duty” video games were exclusive to its Xbox consoles, cutting Sony and the PlayStation out of the deal. That would be a monumental blow to Sony and is likely to be one of the biggest reasons Microsoft is so keen to get the deal done.

For Activision Blizzard, the motivation is the $69bn on the table. It would be the largest acquisition in the history of the video game industry and also the biggest in Microsoft’s history, but as of early December, it appears to be teetering on the brink of collapse.

Blocked in multiple territories

Both Microsoft and Activision Blizzard are massive, multi-national companies. That means the terms of the deal have to be scrutinized in multiple territories. Some of those territories have indicated that they have no issue with it. Brazil’s regulators have signed off on it, as have those in Saudi Arabia.

There are no obstacles in the way in Serbia either. The European Union, though, is far less sure, as is the Competition and Markets Authority in the United Kingdom, which has announced a second investigation into the deal. What happens with the EU and in the UK will concern Microsoft, but what happens in the USA will concern it most of all.

It’s been reported – but not confirmed – that the FTC is considering filing a lawsuit against Microsoft on antitrust grounds. Google is said to be one of the big-name tech companies that have issues with the deal. Sony’s name hasn’t been mentioned, but given the implications for the PlayStation, it’s impossible to imagine that the company wouldn’t also be heavily opposed to the acquisition being approved.

If so, both Google and Sony will have an ally in the shape of FTC chair Lina Khan, who is on record as being against further consolidation in the tech industry. Most of the reporting on the FTC’s opposition comes from the Politico website, which claims to have three sources, all confirming that legal action is being considered and that Microsoft’s arguments in favor of being allowed to proceed are unconvincing.

What this means for Microsoft and its potential new property is a further period of uncertainty. There’s no way of knowing how long the second investigation in the United Kingdom might take, and if the FTC files a lawsuit, we could be looking at a delay that would take us into 2024 or beyond, depending on the outcome and subsequent appeals.

In the meantime, the companies are in limbo – and they can’t afford to stay that way indefinitely. If this takeover collapses, it might not be because of the FTC’s opposition – it may come down to neither party being able to cope with the uncertainty any longer.