Microsoft Corp. could have bought Activision Blizzard Inc. for many reasons. The company publishes a variety of popular video games, including Candy Crush Saga and Call of Duty.
The $68.7billion deal was announced on Jan. 18 and is subject to regulatory approval. It would make Microsoft the third largest gaming company in the globe. Microsoft’s explanation of the biggest acquisition in its 46-year history is that the word “metaverse,” was a significant part of the deal.
The metaverse is a new type of computing that allows people to enter immersive digital worlds instead of switching between apps. The most ambitious vision of this vision will allow people to do everything they do in the real world but with an enhanced sense of presence thanks to the three-dimensional design they can experience via augmented- and virtual-reality headsets.
Facebook Inc. had invested billions in virtual reality. changed its name to Meta Platforms Inc. last year to show its seriousness about this metaverse. The move was mocked by many as an attempt to divert attention from the numerous scandals that have been associated with its social networks. The tech industry was prepared to take the metaverse very seriously. A wide range of developers and companies joined the rush to explain how they were helping to build the foundations for the metaverse.
The fantasy world that everyone is talking about doesn’t exist. Many people trying to describe what it will look like point to gaming. Gaming already introduces users to new digital worlds, and, therefore, to metaverse concepts. Satya Nadella, Microsoft’s Chief Executive Officer, explained Tuesday that gaming will play an important role in developing metaverse platforms like the digital and physical worlds merge.
Nadella began to call Microsoft games metaverses even before the deal. In October, he stated that Halo is a game and was a metaverse. Minecraft and Flight Sim are both metaverses. They are 2D in some ways, but can you make that a 3D world? We plan to do this.
Bobby Kotick, Activision Blizzard CEO, uses similar language to explain the logic behind the Microsoft deal. He says, “Every company with significant resources has aspirations to gaming in the metaverse. So the competition is never greater.” “And that was one of the main motivations we had for this partnership.”
It’s not about creating the future. Activision Blizzard is currently in crisis due to allegations of sexual misconduct, discrimination and harassment. This has made it easier for Microsoft and Activision to negotiate a takeover. Kotick claims that the controversy had nothing to do with the deal. According to a source familiar with negotiations, Kotick will remain CEO until the deal is closed.
Microsoft’s acquisition of Activision will allow it to further its ambitions to create subscription gaming services with Game Pass and help Xbox in its battle against PlayStation. It also allows it to expand its mobile gaming business. This deal builds upon other important gaming acquisitions made by Nadella during his tenure. His first acquisition as CEO was a $2.5 billion deal in 2014 for Mojang, the maker of the virtual-world-building game Minecraft. Microsoft spent $7.5 Billion on ZeniMax Media Inc. in 2020, the parent company to Bethesda Softworks. ZeniMax Media Inc. is a well-known publisher of games such as The Elder Scrolls, and Doom.
The term “metaverse”, which has become a common catchall for the next era of the tech industry, allows Microsoft to communicate the ambitions of the Activision deal. While the metaverse is primarily gaming, if it mirrors our reality, then the market opportunity could be on a scale similar to the creation of the internet or the shift towards smartphones. Microsoft’s actions today signal a future where everyone will be invited to virtual weddings and football games and can send their cartoon avatars to business meetings rather than driving to work. It is not clear if this will be accepted by a significant number of people or if they will choose to organize their professional lives that way.
Microsoft might be better than its metaverse-building peers at top tech, due to its extensive gaming portfolio and its own augmented-and virtual-reality projects. HoloLens is a headset that uses holographic displays to aid workers in construction, health care and manufacturing.
Microsoft may have more freedom to grab land like this, at the very least for now. Microsoft, unlike other tech industry cash-rich giants, has so far avoided being subject to the latest antitrust scrutiny. The leaders of Apple, Google and Amazon have all presented testimony before Congress about anticompetitive behaviour. They continue to face the possibility of new laws or government lawsuits. It is doubtful that they will be able to negotiate deals of this magnitude through regulatory review.
Microsoft has attempted to buy Activision Blizzard. This is a test of how much Microsoft has over its main competitors. Analysts at New Street Research stated in a note that if the government doesn’t challenge Activision’s deal, it would reveal a competitive disadvantage to Meta relative to Microsoft.
Although the idea of creating an immersive world that replicates reality has been around for decades, it has not generated much excitement among consumers. Seamus Blackley, the creator of Xbox, said that gamers are included in this definition. He says, “The acquisition of an entity with known revenue or profit is the potential Activision acquisition.” “The metaverse angle is strange because the metaverse was a failed business in the past and has not shown any revenue or profit.”
It is not clear, however, that Meta and Microsoft mean the exact same thing when they refer to the metaverse. Mark Zuckerberg, CEO of Meta, describes a single digital environment where users can make friends, play games, exercise, and participate in other activities. Oculus headsets would be worn by users. While Meta’s code would provide some of the infrastructures, many of the experiences in this world would not be created by Meta, but by other companies and developers.
Microsoft, on the other hand, refers to a series of separate worlds where one could move back and forth between its Metaverse and, for example, Meta’s. The company plans to not only convert existing game worlds into three dimensions but also bring its flagship office products with it. Nadella envisions Microsoft Office employees working in VR with Microsoft Office products. The company will offer a metaverse version to its Teams chat in the first half of 2022. This will allow people to share PowerPoint presentations with each other in the virtual world.
To get to Microsoft’s future, you must build at least one metaverse. Nadella claims that games are proof that we have reached this stage. However, others metaverse-builders don’t think so. Microsoft may not be closer to the metaverse if it has expensive video games properties, as the concept must expand beyond gaming to make it “real,” Vivek Sharma (a vice president at Facebook gaming) wrote on Twitter the day Activision’s deal was announced. He said, “What an exciting time to be alive!”
