The early Tuesday morning announcement of Microsoft’s plan to acquire Activision-Blizzard was a bombshell for most of the gaming community. Despite the games industry being knee-deep in several acquisitions by companies like Embracer Group, Sony, and of course Microsoft itself, this came off as a much bigger deal. That reaction is appropriate; because it is both a much larger deal than it seems and sets the industry on an even worse trajectory than it was a day ago.
If You Can’t Beat Them
Phil Spencer has a pretty favorable reputation in the industry and it is not hard to see why. Brought on to save the dumpster fire that was the Xbox brand around the release of the Xbox One, Spencer swung the reputation of the Xbox completely around via admittedly beneficial programs like the Xbox Backwards Compatibility project and Game Pass. Spencer’s other major change to the Xbox business was to address the perception of the brand’s lack of titles. Previous efforts by Microsoft involved various partnerships that often failed to create the loyalty Microsoft was looking for. Instead Phil Spencer decided that there was a faster solution, and opened up Microsoft’s massive pocketbook.
Since there hasn’t yet been a lot seen from these studios since they were acquired, it can be easy to forget just how many purchases Microsoft has made in recent years. Before the other bombshell purchase of Bethesda last year, Microsoft had 15 studios directly reporting under it, with eight of them being purchases Microsoft made since Spencer took over. The Bethesda purchase added six more to the war chest. That is a lot of studios to supervise, but more valuable to Microsoft was the IP that they held. Ninja Theory was purchased just shy of a year after seeing massive success with new IP Hellblade, with a sequel immediately going into production. Double Fine has a storied legacy in gaming and was picked up right before the launch of the long awaited Psychonauts 2. The Bethesda purchase was announced with a huge banner image of all the very familiar franchises that will almost certainly never grace a PlayStation again.
If this all sounds familiar, it should – this is effectively the exact same strategy Bob Iger used to make the Walt Disney Corporation into the unavoidable pop culture behemoth it is today. That isn’t to say Microsoft is cribbing Iger’s notes, they’re just doing their jobs. While capitalism theorizes that the market will naturally breed competition, in practice the opposite seems to be true. It is much easier to leverage your own capital to force out your competition entirely — a concept Microsoft is specifically familiar with.
This is bigger than just Activision
Naturally, Microsoft is hardly alone in this behavior. Its competition in corporations like Epic Games and Sony are just as guilty in leveraging their large war chests to secure resources that their competitors can’t access and selling such actions as a net good for you, the player. The Activision-Blizzard merger in particular, though, pushes the line even further into what will likely be stagnation as viewed through the theory of “monopoly capitalism.” Microsoft probably won’t singlehandedly crash the economy, no. However, purchasing Activision-Blizzard runs the risk of stagnating the industry and forcing negative trends to impact far more than their own ecosystem. For example, if Microsoft were to own Crash Bandicoot, why on earth would it want to greenlight a Banjo-Kazooie game anymore than it wants to now? In a post merger, Microsoft would own the IP to nearly every major player in the first person shooter genre, and not just from a multiplayer perspective. The innovations seen in id Software’s Doom reboot and Arkane’s Deathloop are already under Microsoft’s future purview and anything designed for Overwatch 2’s single player would join them.
Microsoft having so many massively influential and popular IP basically guarantees that it will be able to chart the course of the next decade of gaming. This makes Xbox Game Pass a huge factor in this deal, as the announcement included confirmation of the plans to bring Activision games to the service and its continuing growth in users. Game Pass is indeed a hell of a bargain, but it likely won’t be forever. The rise of Game Pass as the primary way players consume games will almost certainly change the way games are made the same way TV was changed by streaming. Consider the transformation of Netflix’s catalog over the past decade from a content hub to a content farm, choosing original content both to fill the voids left open from departing catalogs to form other services and also to have greater control over the content it produces. This has both radically changed the way Netflix itself works but also the way we now consume television and films in our home all while Netflix once again raises its prices because someone has to pay for Cowboy Bebop.
There’s little reason to think Microsoft’s amassing of influence won’t end up pushing other big publishers like EA and alleged abuse den Ubisoft to double down on their fledgling services as well, if not fully trigger an arms race with the likes of Steam and the Epic Games Store. Yes, this does also mean it’s extremely unlikely Call of Duty will be playable on PlayStation, which might be the entire reason someone bought the console. We may even reach the point where smaller game studios and teams will be forced to play ball within these environments even more than they already do, forced to survive on whatever pittance they scrape from these services while waiting for the ones running them to come by with a check for purchase. This change will eventually lead to the same excess seen in the streaming scene — far too much production, with a vast amount of the excess profit going to the top brass.
The Bobby Kotick in the Room
With that in mind, it is important now to center the various abuses and failure to address them that have surrounded Activision-Blizzard and in particular its current CEO Bobby Kotick. Kotick’s removal has been called for throughout the industry, press, and internally at the company as the ABK Workers Alliance indicated in its statement about the purchase:
Microsoft does not actually own Activision yet, so it cannot be said with certainty that Kotick is out following the ink drying — but reporting from the Wall Street Journal indicates that exactly is the plan even as Kotick reportedly didn’t want to sell, per Bloomberg. On paper, that might sound like a fair enough trade. The likelihood of Kotick suffering anything other than removal with a golden parachute was slim, but at least he won’t be over the company anymore, right? That’s a possibility, but this deal also betrays that Kotick and Xbox head Phil Spencer aren’t so different in one particular way – their bloodthirst.
As indicated in the WSJ report on the deal, Microsoft was able to offer the price per share to Activision-Blizzard due to the dipping of shares on Activision’s part; a reaction to the various controversies and investigations going on regarding the company’s conduct. Prior to this news breaking, Phil Spencer was praised for an internal email sent to Xbox employees indicating that the company would be “evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments.” It’s clear now that Spencer meant that he smelled blood in the water and intended to pounce on the opportunity to get his 20th Century Fox. With this in mind, it is naive to believe that a Microsoft purchase of Activision-Blizzard would truly resolve the underlying issues with treatment of its employees even with Kotick’s removal. Phil Spencer and Microsoft have the same goals as Kotick and Activision: make as much profit as possible. Who cares if you have to exploit a horrifying situation to do it?
“It’s a great deal”
Beyond the potential impact to the industry and medium as a whole, this deal exposes yet again the dark underbelly of video games. That the ongoing situation at Activision-Blizzard could even potentially end in Bobby Kotick getting to exit on his own terms and Microsoft having yet another near-monopoly on a tech sector is a failing of both this industry and the systems around it that are supposed to protect us.
In an interview with VentureBeat following the announcement of the merger, Bobby Kotick was asked if the misconduct that happened on his watch was a factor in accepting Microsoft’s offer for his company. His response said it all:
“I think certainly the [California Department of Fair Employment and Housing] filing and the Wall Street Journal article contributed to that, but stocks go up and down for a variety of reasons. I think our view was that at $95 a share with all cash, that’s a really great deal for our shareholders. And so that was an easy and independent judgment. It’s a great deal.”