Microsoft took over gaming giant Activision Blizzard to provide ‘building blocks for the metaverse’. But with metaverse still a distant dream, what is behind its plunge into the world of gaming?
It is not just the players, but gaming companies too are making and breaking records.
“Grand Theft Auto” video game maker Take-Two Interactive (TTWO. O) announced on January 10 that it was buying Zynga for $11.04 billion in a cash-and-stock deal.
The milestone did not last long. Just a week later, Microsoft announced that it was acquiring video game company Activision Blizzard for a whopping $69 billion, shattering all the previous records. It is the company’s biggest ever buyout and the largest deal ever not just in the gaming industry but also in tech.
Microsoft will now become the world’s third-largest gaming company by revenue, behind China’s Tencent and Japan’s Sony. It is spending an amount that is equal to what it had shelled out on five of its largest previous acquisitions combined.
Despite the difference in deal sizes, some parallels can be drawn between the back-to-back Microsoft and Take-Two acquisitions.
Microsoft will instantly gain a large audience in mobile gaming, where it currently has a negligible presence. Mobile is the largest as well as the fastest-growing segment in gaming and Activision owns mobile-gaming studio King, the maker of Candy Crush.
Activision’s Candy Crush Saga and Call of Duty: Season 1 are among India’s top 10 highest grossing Android games. This will also give Microsoft a major foothold in Indian gaming.
Home to more than 430 million mobile gamers, India’s gaming market is currently worth $1.6 billion and growing at 35-40% annually, with mobile gaming contributing more than 90% to this value.
And it will go to the next level after the roll out of 5G services.
Most importantly, the acquisition bolsters Microsoft’s cloud gaming service, the Xbox Game Pass, which already has 25 million users. The company will gain access to Activision’s 400 million monthly active players from 190 countries as it plans to launch Activison games into Game Pass.
The Netflix-style subscription service gives its members access to a rotating catalogue of games from a range of developers including EA. The games can be played on Xbox consoles, Windows PCs or Android smartphones.
Streamed via the cloud on those devices. Game Pass also supports Android smartphones and tablets.
Microsoft has been pushing cloud gaming where games are streamed onto devices from company data centres but requires a fast internet connection.
The acquisition helps Microsoft establish a cross platform gaming ecosystem. After enterprise software and cloud, Microsoft will also become a formidable player in gaming, regardless of its long term metaverse plans.
Data analytics firm Newzoo estimates that the global gaming market generated $180.3 billion of revenues in 2021. Microsoft’s gaming market share is set to go from 6.5% in 2020 to 10.7% when the Activision deal closes.
Microsoft said the Activison purchase will provide building blocks for the metaverse or virtual online worlds where people can work, play and socialise.
Its other metaverse projects are taking shape. It has launched its mixed reality headset HoloLens 2, which is now available in India too.
This year, it is launching Microsoft Mesh, which lets customers create immersive digital copies of their offices. Some say the world-building game Minecraft, which Microsoft bought in 2015, gives a peek into the metaverse.
Microsoft hopes that valuable communities of gamers will help in creating the worlds inside the metaverse when it becomes a reality from just a theoretical concept now.
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