Microsoft buying Activision Blizzard is a nail in the gaming industry's coffin

Activision
Activision (Image credit: Windows Central)

If you haven't heard the news yet, here's the scoop: Microsoft just plonked down almost $70 billion to gobble up Activision Blizzard, the company famous for Call of Duty, World of Warcraft, and getting sued by California for sexual harassment and toxic workplace practices.

That's a big deal — arguably the biggest literal deal to ever grace the gaming industry. But even though it's massive news, there's a question to be asked: Is it good news for anyone besides Xbox?

Based on all the evidence, not really, especially in the longterm. Xbox gaining a much larger stake in the video game industry not only pushes industry consolidation into just a few large companies, but can stifle innovation among newer IPs and signal the death of others.

The biggest fish in the sea

Phil Spencer Xbox 20 Celebration

Source: Microsoft (Image credit: Source: Microsoft)

Before we dive in, it's highly recommended you read what analysts have to say about Microsoft's Activision acquisition. Whether or not you agree with the theories presented there and in this article, they're all based on industry patterns.

Let's start with the obvious danger this supremely expensive deal presents: hyper consolidation of an industry already bound to a few key players, at least on the console and "AAA" game side of things. Sure, there are Google and Apple for mobile games, but when it comes to the PC and console experiences gaming enthusiasts crave, there are only a few big boys on the block. And now? Even fewer.

The competition's getting thin. As of right now, we have Microsoft, Sony, Nintendo, and whomever Microsoft's next acquisition prey is. EA, Square Enix, and Ubisoft's days are numbered at this rate. Sony doesn't have the cash flow to pull these sorts of seismic stunts, and Nintendo's been playing by itself in the corner for a long time now.

First Rare, then Mojang, followed by ZeniMax Media (Bethesda), and now Activision Blizzard — each time the maw of Redmond opens, it proceeds to take a bigger bite of the industry (it's gobbled up way more studios and companies than just those four, but said quartet are big ones). On the surface, there's nothing wrong with an acquisition. Big fish eat small fish; it's the way of the world. But what happens when one fish grows so gluttonous that its former rivals have little food for themselves?

Between Microsoft outright buying the biggest games on the planet and making sure everything of less importance is bound exclusively to Game Pass, it's a scary time to be a competitor. Sure, Sony's PlayStation division is doing well now, but you better believe some of the company's suits are sweating bullets thinking about future competition optics with Xbox market prospects growing exponentially more impressive by the day.

The fate of peripheral IPs

Crash Bandicoot 4 Image

Source: Activision (Image credit: Source: Activision)

Even if you couldn't care less about industry health and the state of competition, think about what Microsoft itself will do with its newfound riches. There is the chance that now-CEO of Microsoft Gaming Phil Spencer will greenlight a lot of great projects utilizing Activision-owned IPs that haven't gotten much love in recent years. But there's also the chance Microsoft will let the niche items wither and die.

Take, for example, Crash Bandicoot. The orange fella didn't get much love from Activision for a while until a recent rebirth with Crash Bandicoot 4: It's About Time, as well as the kart racing spinoff and N-Sane trilogy. Will Microsoft give characters like Crash and Spyro their time in the sun? Look back at the only other major cartoon icon Microsoft gained from an acquisition — Banjo (of Banjo-Kazooie fame) — for your answer. Spoiler: Banjo has been in a retirement home for a long, long time, and Microsoft doesn't visit him. And don't even mention what happened to Conker.

The point is, there's a chance Xbox will pull an Ori and give Crash and Spyro love. But Microsoft has shown a preference for burly military guys and fast cars over loveable cartoon mascots. Two gaming legends may have gone from a bad home to a worse one.

Consolidating a nightmare of mediocrity

Call of Duty: Warzone

Source: Activision (Image credit: Source: Activision)

With regards to that mention of burly guys with guns and speedy automobiles, it's worth noting Activision's marquee property Call of Duty fits in very, very well with Xbox's lineup of franchises that will spin in place in perpetuity. Look at Gears, Forza, and Halo — great if you've played any single title in isolation (like the recent Halo Infinite or Forza Horizon 5), but all are redundant franchises if you look at their various installments as a collective body of work, even if a lot of recent titles have pushed those franchises forward. Call of Duty fits right in with that lineup. Competent, assembly line produced, and easily replicable potato chips for the masses.

The potato chips analogy fits in with Microsoft's Game Pass philosophy. Just like how Netflix puts an emphasis on binge-able content, Xbox looks set to create an annual lineup where the bar is "sellable quality" rather than, say, Sony's starkly contrasted emphasis on "tour-de-force experience" quality. Even Microsoft admits it's jealous of games such as The Last of Us Part II. It knows full well the difference between its titles and Sony's, although with the ZeniMax acquisition, the difference was made narrower than ever.

What if the Microsoft storm manages to overwhelm the competition, then? What if Xbox purchasing every related company under the sun lands us in a gaming era where Microsoft and its Infinity Gauntlet (read: Windows and Azure profits) make the gaming landscape such that instead of replicating the magic of rivals' games, Redmond simply overshadows and quashes them with its unending, subscription-bound lineup of digestible, amorphous gaming "content"? One company leading the charge on what is successful in an industry as large as video games can be dangerous for anybody who doesn't want to follow in its stead.

Too many dangers to imagine

MAster Chief

Source: Microsoft (Image credit: Source: Microsoft)

There's a chance that Xbox will let its recently-acquired studios operate relatively autonomously and everything will be business as usual for consumers, with the only real difference being Microsoft making a lot more money behind the scenes every quarter. There's also the chance Microsoft will unintentionally bork everything it touches, ruining what once were capable studios, although that hasn't often been the case with its smaller acquisitions.

And speaking of chances, Switch and PlayStation owners better get ready for an era where, between Game Pass and acquisitions, the odds are solid a lot of their favorite franchises will be treating them like second-class citizens. Timed DLCs and exclusive releases are just the tip of the iceberg.

Perhaps everything will work out to consumers' satisfaction regardless of which ecosystem they prefer and the existing industry players will be perfectly fine with an Activision-shaped hole in their hearts. But the potential consequences of this deal, for thousands upon thousands of developers and millions of consumers, cannot be underestimated.

Robert Carnevale is the News Editor for Windows Central. He's a big fan of Kinect (it lives on in his heart), Sonic the Hedgehog, and the legendary intersection of those two titans, Sonic Free Riders. He is the author of Cold War 2395. Have a useful tip? Send it to robert.carnevale@futurenet.com.

55 Comments
  • It is worthy of celebration. Microsoft will be a great thing for people that work for Activision Blizzard and game pass subscribers will have the largest/best library ever to play from and Microsoft hasn't shown any indication to do exclusivity in a way that harms gamers - launching titles in Steam, PC, Console and Cloud gaming. The real answer is that console exclusivity is a problem, but Microsoft isn't the guilty one of dominating an industry because of that cough cough sony cough cough... and... i bet Facebook/Amazon were eyeing this up.
  • sony just needs to allow gamepass on playstation
  • This is the next logical step.
  • Xbox need to use this as a bargaining chip to get access to ip's like Spiderman on the platform. If they played their cards right, they could break down some walls, and everyone could benefit. That's a big if though.
  • No reason for that - if people could get everything on Playstation, why would anybody buy Xbox console?
  • Sony doesn't take AAA studios that have been making multi platform games for a decade+ and force them to be exclusive. Microsoft is taking this to a whole new level and its disgusting. Xbox and pc are not actually getting anything out of this, its the same games they have always had access to, this is literally just designed to screw over other gamers and no one should be happy about that.
  • "Sony doesn't take AAA studios that have been making multi platform games for a decade+ and force them to be exclusive"....Sony doesn't do that because they don't have the money to buy AAA studios. On the other hand, Sony does something much worse, it is buying exclusives from multi platform franchises like Final Fantasy and Street Fighter, but when Sony does it, it's cool.
  • Recall that it was Xbox, NOT Sony, who used to promote the value of third-party games and emphasize that Xbox One X was the best system for playing third-party games. Now, to be fair, Microsoft obviously did this because Sony had the larger first-party library, so they used their only strength they had left: the superior technology of the One X over the PS4 Pro. But let's be clear, Sony effectively forced Microsoft into this mode. So good or bad, this started with Sony who's primary selling point had been first party games. Sony, and competition from other sources that have nothing to do with consoles: Apple, Google Stadia, etc.
  • Sony has never gone out and bought a huge developer to deprive a rival platform of it's games. This has never happened! Sony have bought studio's they have a close relationship with and they've usually been small to medium sized. They'd bought studio's for talent not for the ip's. Those studios produced games that added to the PlayStation portfolio and were unique. Epic single player campaigns were dying out with MS in particular hinting this genre was finished. Sony took a gamble and made some of the greatest games in history. Exclusive games are not bad. If MS invested in talented studio's who produced great and unique games and had their own great exclusives that would be good on them. They've not done that. They've looked at the most popular ip's and simply used their huge cash reserves to deprive the competition of having these games on their platform. There's a world of difference here. This is the beginning of the end of PlayStation make no mistake and the only competition coming Microsoft's way will be equally wealthy corporate companies like Amazon, Google & maybe Apple. It'll all be about the bottom line and what sells. Small studio's are all going to be gobbled up and creativity will just be an afterthought. RIP gaming
  • On the other hand, Sony does something much worse, it is buying exclusives from multi platform franchises like Final Fantasy and Street Fighter, but when Sony does it, it's cool. Sony tried to buy Remedy, a studio they had no relationship with before Control. If successful, they would simply use another narrative besides the close relationship.
  • mister_kiss, that's not what happens where there are acquisitions. As any entrepreneur will tell you, an acquisition rich market is the BEST environment for startups, because it's the easiest one in which to raise money. Investors pour money into early stage startups when they say an acquisition as a likely exit point. And those investments are used to pay the developer salaries during the development period. If these were just a few isolated mergers between giants, that might be a different story, but this is very much an acquisition-friendly environment, at all levels. MS isn't the only company doing this; they're all doing it.
  • Not at all. The future of gaming is unfortunately going to be a West vs East. China’s Tencent has been gobbling up the industry for years, with no backlash. I honestly thought Activision would fall towards Tencent. It’s time western companies do the same to protect our IPs from micro transaction and soon to be NFT chaos. Microsoft I believe will protect the future of gaming. I’m stoked for this. And so should the world. It’s time to celebrate.
  • Interesting stance, and of course, all opinions are welcome. I wasn't thinking in terms of West vs. East here, but it's a worthwhile discussion. Definitely worth exploring more
  • My thoughts exactly.
    For some reason, Tencent has been having a field day, no one even comments on it. MS does the same thing, and now the gaming industry is about to be buried (coffin and all).
    In any case, this was bound to happen. Ever since gaming became really big money, this was an inevitable result.
  • But all Microsoft games have microtransactions, that's a terrible example. Also, Tencent is merely an investor, they don't restrict where games can be released or what content is available. They basically buy up the developers that are already making crazy amounts of money because they are smart investments.
  • Exactly. That's why Mobil and Exxon merged.
  • While there are obvious similarities and many of the same skills involved to put the deals together, the market effects of mergers are different from acquisitions. Mergers typically consolidate giants and do reduce competition. The hopeful benefit is cost reduction due to elimination of redundant functions, but these often are not good for consumers. Acquisitions, especially of smaller companies (so would be less applicable with this Activision acquisition, except that Activision was in bad shape due to its morale and legal troubles) attract investors hoping to participate in the next one. This in turn drives entrepreneurial activity and seed startups.
  • So much drama.
    Maybe you should look over to see what Tencent is doing in China?
    This was inevitable. Consolidation is bound to happen with extremely capital intensive industries - it's the way of business.
    You may not be aware, but so many game studios do not survive the cut-throat, winner takes all gaming industry. Either they close up shop, or their employees migrate to the bigger gaming studios. This has been happening for a long time. Ever wondered why these studios even agreed to sell in the first place? It's not like anyone is forcing them. It's simply because they were actually struggling in most cases. Ask around, how many online retail giants are there? Amazon, Alibaba, maybe Newegg and then others.
    How many Mobile OSes are there? Android, iOS.
    Big chip makers? TSMC, Intel, GF, Samsung - with Samsung being a relatively small player in the fab world.
    Yes there are smaller players here and there, but these expensive industries always consolidate to a few big players. It's an inevitable consequence of capitalist systems.
  • "What if Xbox purchasing every related company under the sun lands us in a gaming era where Microsoft and its Infinity Gauntlet (read: Windows and Azure profits) make the gaming landscape such that instead of replicating the magic of rivals' games, Redmond simply overshadows and quashes them with its unending, subscription-bound lineup of digestible, amorphous gaming "content"?" I am with you here. I don't mind Microsoft buying some studios but I think they need to be raising the bar of what they have. Sony has a quality bar that is just so much higher and I want Microsoft to pursue that. I know it won't happen overnight but I think they should be showing some more of a raised bar by now.
  • People say there is a quality bar with Sony, but I don't see it. We're in the golden age of gaming and we're *still* not happy. Every platform has games that are awesome.
  • Platinum age of gaming or bust, blahism.
  • There's not a quality bar. Nintendo doesn't have it either. It's just an ambient opinion.
  • Strange article. Anyway I do not think it matters much since MS / xbox games are available on pc too (which in the end is the most open platform, which is nice for consumers). So this will benefit platforms like Steam too. Heck even Linux gamers can probably benefit from this through Steam OS + Proton.
  • Robert, I think you've raised all the valid criticisms, but I think that's just one facet to the discussion. There are others that I think more than mitigate any concerns: 1. Microsoft is doing this in response to Sony and Tencent. They feel they have to, or they will be forced out of the gaming business. Even ignoring Tencent, what's the chief argument for PlayStation over Xbox? First party games. So, if this is bad, at least place a portion of the blame at the feet of those who started the war. Remember, Microsoft used to promote Xbox One X as the best platform for third-party games, which many said was just Microsoft admitting that Sony had all the good first-party content. 2. Consolidation is a short term thing. We all tend to think whatever happening right now is changing the world and that the sky is falling. Classic view of the very young or very naïve (not accusing anyone of being either, just observing that it's a common perception among those groups). But it least with respect to business dominance, history tells us it is 100% ephemeral, even without governments breaking up companies. No company can retain a dominant position in any industry for more than a decade or two. It was only a few years ago, that many said GE was too big and dominating every industry from aircraft to television (when they owned NBC), but management couldn't keep it all together and GE collapsed, toppled by hungry, more nimble smaller companies who outflanked them. Even if MS becomes dominant in gaming content, it will just create an opportunity for some entirely new approach (like VR or casual gaming, which MS ignores, or something entirely new no one is thinking about yet). If MS is reaping big profits, it will invite innovative competition. 3. Profits invite investment which spawns innovation. Activision Blizzard was in a world of hurt before this acquisition. Their market cap had suffered. This adversely affects the gaming industry, scaring off some investors, which in turn reduces access to capital for other startup gaming companies. By buying them, MS boosts the returns for Activision's shareholders, which adds shine back to the whole gaming sector. This encourages VCs and angel investors to fund innovative gaming startups, with a visible exit strategy of acquisition by Microsoft (or others). An IPO may make more money for investors, but those are very, very rare. Most startups succeed for their early investors via acquisition, and without early venture backing, they would never get going. So, this acquisition doesn't hurt innovation, it drives it by incentivizing investment in startups, even if it doesn't also occur within Microsoft's walls.
  • Speculative possibility: maybe with this, MS has a strong enough hand that it can "persuade" Sony to allow Xbox Game Pass on PlayStation, or to agree to return to cross-platform games if Sony does the same with some of their exclusives. If that happens, maybe this actually becomes a tool for reducing the IP silos that have arisen in gaming. To be clear, I think this is a long shot and less likely to happen than not, but it's within the realm of possibility and something only enabled by a giant acquisition like this.
  • Interesting thoughts all around. I'll agree to disagree on some aspects, but at the end of the day, most everything to do with the discussion around this deal is speculation, so we'll have to wait and see either way.
  • Robert, while some parts are speculative, the effect on the market (acquisition bosting investment activity and helping startups) is not speculation, at least all else being equal. That is how the economy works at the macro level. An individual investor or company may buck that trend, but in the aggregate, it's an inescapable law, like lower prices increase quantity demanded.
  • There is nothing wrong with exclusive games, it's what gives a console its identity. But Sony have bought talent not ip's. They invest in talented studio's they have a good relationship with and fund them to make great titles very few others would take a commercial gamble on. They don't use brute force over creativity and just buy up the most popular 3rd party titles just to deprive your competition. MS should have invested in talent and made their own great exclusives but they've just splashed their cash and used brute force to take over the market. When they bought Bethesda they made all the right noises at first and said we're not looking to deprive players on other platforms. I thought ok fine, they will put these games on GamePass but still let PS owners buy them full price as usual and get some profits from them. That talk quickly went out the window and because the gaming press barely raised objections they are now even more emboldened. It's almost like the old days of the MS Embrace, Extend, Extinguish policy where you try to court good publicity whilst planning to kill your competition through huge cash reserves & a powerful position. This is the beginning of the end for PlayStation there can be no doubt and as a gamer for many years this makes me incredibly sad. Sony took chances on games that were not guaranteed to be commercial hits and I fear a future where only sure fire hits get released with micro transactions stuffed in to them. A sad day
  • mister_kiss, Microsoft absolutely never said they would keep Bethesda games on other platforms. This was an area of intense speculation across the gaming media precisely because they didn't address this until quite some time after the acquisition. When they finally did, they said new games would be exclusive to the Microsoft ecosystem.