Microsoft to buy Activision Blizzard for $68.7 billion

Gaming giant Activision Blizzard, under the gun from investors over sexual harassment controversies and ongoing executive turmoil, has pulled the escape cord: The company has agreed to be acquired by Microsoft in a $68.7 billion all-cash deal, inclusive of the company’s net cash.

Activision Blizzard CEO Bobby Kotick has been rumored to step down amid ongoing SEC investigations and sexual harassment scandals in his company, which employs nearly 10,000 people (more than 2,000 current and former employees signed a letter last year calling the company’s responses to a discrimination lawsuit “abhorrent and insulting,” and more recently, over 1,000 employees signed a petition calling for Kotick’s resignation). Kotick reportedly knew for years about sexual misconduct and rape allegations at his company, but he did not act. Yet with this acquisition, Microsoft says that Kotick will remain CEO. As a whole, Activision Blizzard will report to Microsoft Gaming CEO and Head of Xbox Phil Spencer.

“As a company, Microsoft is committed to our journey for inclusion in every aspect of gaming, among both employees and players,” Spencer wrote in a blog post this morning, implicitly addressing the ongoing unrest at Activision Blizzard. “We also believe that creative success and autonomy go hand-in-hand with treating every person with dignity and respect. We hold all teams, and all leaders, to this commitment. We’re looking forward to extending our culture of proactive inclusion to the great teams across Activision Blizzard.”

According to sources close to the deal who spoke with the Wall Street Journal, Kotick is expected to step down once the deal goes through, which will likely be in 2023. But while Kotick remains at the helm, it’s not likely that the news of this acquisition will assuage workers’ concerns. Activision Blizzard employees have staged several walkouts protesting not just the ongoing sexual misconduct scandals, but also the layoffs of quality assurance contractors for “Call of Duty.” Jessica Gonzalez, a senior test analyst, announced her resignation in late November after making a name for herself as one of the loudest internal voices for a change in the company, emerging as a leader in its ABetterABK workers’ alliance.

“Your inaction and refusal to take accountability is driving out great talent and the products will suffer until you are removed from your position as CEO,” Gonzalez wrote in a resignation message in Blizzard’s internal Slack, which she shared on Twitter. “This may seem harsh, but you had years to fix the culture and look at where the company currently stands.”

In November, Spencer wrote in an email to Xbox staff that he was “evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments” in light of the allegations against the company. In a conversation with The New York Times last week — before news of the Activision Blizzard acquisition was known — Spencer was asked about his company’s relationship with the besmirched gaming giant.

“This isn’t about, for us as Xbox, virtue-shaming other companies,” Spencer said. “Xbox’s history isn’t spotless.” At a Microsoft party at the 2016 Game Developers Conference, the company hired schoolgirl dancers, exemplifying the same “frat boy” culture that’s caused so much strife for women across the gaming industry. “That was a painful moment in our history of Xbox,” Spencer added.

This deal will make Microsoft the third-largest gaming company in the world by revenue, per their own press release, falling behind Tencent and Sony. Activision Blizzard is home to mega-franchises like “World of Warcraft,” “Call of Duty” and “Candy Crush,” while Microsoft Gaming produces Xbox consoles. Microsoft says it will include Activision Blizzard games in its cloud gaming subscription Game Pass, which recently reached 25 million subscribers. Meanwhile, Activision’s games boast nearly 400 million monthly active users.

I’m on vacation today (lol) but if I were not I would be calling up some antitrust experts because Xbox buying Bethesda and now Activision sure seems like the type of horizontal merging that the DOJ frowns upon

— Jason Schreier (@jasonschreier) January 18, 2022

This acquisition isn’t Microsoft’s only several-billion-dollar deal in recent memory. In late 2020, Microsoft announced its plans to acquire ZeniMax Media Inc., parent company to Bethesda Game Studios and other publishers, which produced popular games like “Edler Scrolls,” “Doom” and “Fallout.” So, the purchase of Activision Blizzard could raise concerns in the Department of Justice about Microsoft creating a gaming monopoly. Meta, for example, is currently facing an antitrust suit regarding its growing VR business. But ironically, this acquisition might give Meta a bit more competition in the virtual reality space.

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” said Satya Nadella, chairman and CEO, Microsoft.

This purchase — which values Activision Blizzard at $95 per share, above its market rate — is expected to close in 2023, though the boards of both Microsoft and Activision Blizzard have approved the transaction.