Microsoft announces its plans to buy Activision Blizzard for Xbox

Activision (Image credit: Windows Central)

Source: Microsoft Blog (Image credit: Source: Microsoft Blog)

What you need to know

  • Activision-Blizzard is known for huge franchises like Call of Duty, World of Warcraft, and Candy Crush.
  • Today, Microsoft revealed that it is buying the entire company, with plans to expand mobile, cloud, and Xbox Game Pass content.

Updated Jan 18, 2022: It's now officially confirmed (opens in new tab)!

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Last year, Microsoft completed its purchase of ZeniMax, which included blockbuster studios like Bethesda, id Software, Machine Games, Arkane, and many more. Microsoft is aggressively seeking to expand its first-party IP operations as it looks to bolster the quality of its first-party games lineup, with its Netflix-like Xbox Game Pass service requiring content like never before. And now, it looks like we may have information on the next big deal about to drop for the Xbox platform.

Reports from the WSJ (via Jason Schreier) claim that Microsoft is seeking to buy Activision Blizzard. Activision is known for franchises like Call of Duty, Guitar Hero, and Sekiro, while Blizzard is known for World of Warcraft, Starcraft, and Diablo. The acquisition would also nab mobile publisher King, helping Microsoft make inroads in the lucrative mobile gaming market — a sector that they're largely absent from outside of Minecraft and Fallout Shelter.

While there's no official word from Microsoft or Activision if this deal is actually happening, it would make a lot of sense for Microsoft, which is sitting on billions of dollars in liquid funds losing value due to inflation. Activision has been plagued by repeated lawsuits following inquiries into its workplace culture, which gives Activision's beleaguered exec team a definitive escape from having to deal with repairing the company's reputation.

A deleted post (opens in new tab) on the notoriously leaky Microsoft blog seems to suggest Microsoft plans to offer almost $70 billion dollars to complete the transaction.

Microsoft will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard's net cash. When the transaction closes, Microsoft will become the world's third-largest gaming company by revenue, behind Tencent and Sony. The planned acquisition includes iconic franchises from the Activision, Blizzard and King studios like "Warcraft," "Diablo," "Overwatch," "Call of Duty" and "Candy Crush," in addition to global eSports activities through Major League Gaming. The company has studios around the word with nearly 10,000 employees.

This is another seismic event for the gaming industry if it goes ahead, giving Microsoft another massive range of potential exclusives for Xbox Game Pass. We'll be sure to update you if and when this all goes official.

Jez Corden
Co-Managing Editor

Jez Corden a Managing Editor at Windows Central, focusing primarily on all things Xbox and gaming. Jez is known for breaking exclusive news and analysis as relates to the Microsoft ecosystem while being powered by caffeine. Follow on Twitter @JezCorden and listen to his Xbox Two podcast, all about, you guessed it, Xbox!

  • World of Warcraft on Xbox Series X as part of gamepass would be great as we don't have Final Fantasy...
  • Maybe High Moon Studios can get out from underneath the choking foot of Activision now and make more games inline with their FANTASTIC Transformers games. Can you imagine a next gen game in that franchise from them? Drool
  • Holy guacamole. Gotta say, I didn't see this one coming.
  • Jeez...this should be illegal
  • Nope.
    The gaming world is too big and too diverse.
    Even the biggest players run in the single figures.
    As somebody once said, They can keep on doing this all day long.
  • Wow. Microsoft isn't playing. Not one bit.
  • Does Activision still own the No One Lives Forever IP?
  • Makes perfect sense.
    (Remember what Spencer recently said about changing their treatment of Activision? 😆) Three big reasons:
    1- Activision management had to go. Cashing out is graceful.
    2- MS cash hoard is losing value by the minute. Inflation! The $150B stash just lost over $10B in value (more than Bethesda) just by sitting unused. Adding Activision 's $6B in net boosts the MS bottom line by a whopping 5% at the cost of 40% (?) of the idle cash. It'll take about 8 years to pay for itself, less if inflation and stock zppre iation is factored in. 5% of $3T alone makes it worth doing.
    3- MS gets more studios, MMORE (sic) online gaming revenue, and most importantly a decent presence in mobile gaming. $2.3B a year. Me, I would've preferred they buy WB DISCOVERY (DC IP! Video! Music!) or EA (BioWare!) but Activision is the preferred choicd from the strategic point of view. We'll have to wait a couple years to see whst Activision Mobile can do with MS IPs. As for the inevitable competitive whining? Even with Activision in the vold MS won't be any higher than 3rd or 4th biggest in gaming, with Activision only adding 4% of the global gaming market. XBOX even with GamePass barely rates 2-3%. Lots of teeth gnashing but 2023-24 is going to be ridiculous. Now we see why MS has bden shrugging off Playstation 5, Sony on PC, and Spartacus. They're going after Ubisoft, Tencent, Nordic (or shatever tbey're called this week). Consolidation just peaked.
  • I don't claim any specific insider knowledge, but I doubt MS holdings are literally in cash. They are deployed just like a person with millions of dollars in savings: they sit in various forms of liquidity, from cash, to CD's, to bonds, to general market equity holdings. I know the article said the money is evaporating due to inflation, but as bad as inflation is, I don't think MS is actually losing 7% per year on its holdings. Their CFO would be fired for allowing that to happen. :-)
  • Agreed.
    It definitely isn't now. 😏
    The stock long term appreciation is a bigger issue,no doubt. Even if right away there will be some sell-off. But one of the big knocks on Activision is how ruthlessly revenue focused they have been since merging with Blizzard. And also their focus on annual launch cadence, especially for CALL OF DUTY, neglecying the long tail revenues of earlier releases. That.Will.Change. The next big question is the multiplat question and odds are that, like Zenimax, Activision Publishing will remain independent multiplat for the existing big franchises like Cod. Especially the online stuff. But the big win for Activision staff, who I expect are bunny-hopping with joy, will be the loosening of restrictions on new IP. MS gets 12 more studios to gros and a lot of older franchises to reboot.
    I expect SPYRO will be near the front of the list.
    Also, I wonder if the KING games will come to XBOX to boost the casual gamer appeal or if they'll do a GAMEPASS for mobile now. Like I said this deal makes a lot of sense.
    (Not sure how Ubisoft and EA will take it, though.)
  • Inflation is real in the sense that you lose purchasing power. For most people and companies, they live day to day buying goods and services. Leaving cash in your pocket (all forms of cash, short term instruments etc.) leaves you with less purchasing power in the future. For example. I run apartments. I have to buy appliances when I renovate apartments (about 2 per month). Last December, I could buy a dishwasher, gas stove, and refrigerator for about $1200. Today it is $1700. I had cash to by these in December. Should I have used the cash to buy the appliances and stored them somewhere knowing full well I would put them into service within 3 months? But I have plenty of cash on my balance sheet to ensure I can absorb any dislocation in my business. Such as the courts refusing to evict people because of Covid, reducing my cash flow. ON the other hand, cash allows you to be opportunistic in expanding business. MSFT has always bought companies to increase its scope of business. In this case, they keep cash on hand to respond to changes in market conditions and respond to competitor actions. The world of low interest rates is real and not likely to change significantly baring any significant global issue. While COVID change many things, it gave MSFT, Google, Amazon and others lots of opportunities to expand operations. There is an ocean of cash sitting around the world looking for productive locations. MSFT has a war chess to protect their market position and reward their shareholders and be good corporate citiznes.
    They will not jeopardize that war chest unless under extreme stress. Look what EXXON did in 2020. they borrow a huge amount of cash reduce operations and maintained and increased their dividend. They like many in the industry reduced Capex and made sure they preserved profitable operations. As Oil rises towards $100, Exxon is repaying $3 billion plus a quarter to reduce the mountain of debt they absorbed in 2020. While this is the polar opposite of MSFT use of the balance sheet, the motivations are the same. Exxon has a huge infrastructure of fixed assets with a ton of government regulations and social constraints to manage. Finally, at a $2 trillion value, $150 billion is a 13% allocation to cash which is rather high for a high growth high margin business. So, in a sense they have a ton of cash to put to work. They should annouce a special dividend totaling $75 billion and return it to shareholders and let them deal with the ramifications of high inflation.
  • ddn123, I agree with all of that, except that "cash" does not have a crisp meaning in this context. Even as "cash" it's not literally just sitting in a non-interest bearing account. The money is always working in some way. Obviously, MS believes they can see greater returns from deploying it for growing the business than just letting it ride the market, but for the dollars in their war chest, most of those are almost certainly still earning more for them than the rate of inflation. Keep in mind when inflation goes up, so do rates on money market accounts and CD's.
  • Granitestatecolin Under accounting rules, cash means cash. This could be any security with a maturity of less than 3 months (There are more rules defining if a security is considered cash based on default risk, liquidity, and other market considerations). So, owning a 3-month T-bill is cash. There are many other methods of protecting cash. You must be sure you protect the cash from price disruption. In 2008, the meaning of cash became acute. Some money funds "broke" the buck, meaning your cash went from $1 to $0.98. For MSFT with 13% of its balance sheet sitting in cash, you put the cash to work. But in this low interest high inflation market, you buy assets that will appreciate, or retain to pursue strategic opportunities. In this case, MSFT believes this acquisition will raise long-term future free cash flow.
  • F*** yeah now I can play World of Warcraft and Starcraft on an Xbox controller 💞👍💞👍💞👍
    Take that Sony.
    Activision and blizzard their games have been suffering a lot the past five years hopefully Microsoft can turn it around in a good direction
  • I'm stoked for Candy Crush to be Xbox exclusive.
  • Once the deal is finalized, expect Bobby Kotick to exit the company with a golden parachute.
  • Considering he's been linked to the guy with "the island" it might be golden handcuffs.
    But for the next 9-18 months MS has no say.
  • Microsoft just unlocked the gaming metaverse for xbox. Not sure but Call of duty as xbox exclusive!! just boooooom......
  • I doubt CoD would go exclusive. It's a massive seller as it is. Making it exclusive would only really hurt it, IMO. However, making the game run best on Xbox and then just pushing that would be a pretty solid move.
  • Just imagine if xbox vr releases with COD exclusive, I don't think this will hurt the game business. COD is such a big name.
  • I really hope they don't do this like Bethesda, instead opting to let them work independently and keep their franchises on other platforms. Buying every major studio to lock IPs in your ecosystem is good personally, but bad for the industry as a whole.
  • Oh, they'll do it exactly like Bethesda.
    Keep existing commitments, keep online games multiplat, move single player and PC-only games to Xbox.
    Don't forget, with every passing day, Sony matters less.
    Gamepass, Gamepass, Gamepass.
  • Oh no the Monopoly is starting, this is a real bad for consumers. Some people doubted me that Microsoft wasn't trying to build a Monopoly, but this is proff that they are.
  • The bought 4% of the mzrket and thst's a monopoly?
    Third in s market of hundreds is a monopoly?
    "That word doesn't mean what you think."
  • I said that they are building a Monopoly, they just started, they didn't already finished, learn how to read before trying to sound smart. And don't undesell Microsoft buying by far the biggest AAA third-party publisher that's worth as much as Ubisoft, EA and Take 2 combined. I'm going to say again, Activision is worth as much as Ubisoft, EA and Take 2, if they decide to spend the same amount of money again, they can own basically own close to the entirety of the western gaming AAA business.
  • There is truly little threat of a monopoly forming in gaming. The market is too broad and diverse. Can MSFT develop a platform where a company can develop a game and then cash out? Can MSFT develop a platform where lots of independent game companies can market their products?
  • Fascinating news. I'm not a player of any of these games (in contrast to the Bethesda acquisition, where I am hugely into many of the their franchises), but love to see MS proving its commitment and growing its first party gaming capabilities. I'm also surprised that even after this, Sony would still be bigger. What is Sony's gaming value? Does that include the PS hardware division, or just in terms of gaming content IP? I also wanted to comment on one financial point in the article, stating that MS is "...sitting on billions of dollars in liquid funds losing value due to inflation." I don't believe that's correct. If you have $1,000, you might leave it all in your checking account, where it earns no interest. But for millions of dollars, and even more so for billions of dollars, I'm nearly certain that money is working for MS and generating standard market returns, which would collectively exceed the rate of inflation. A standard corporate financial plan for deploying banked profits would mix for various liquidity speed - only a tiny portion (possibly none) in cash in a checking account for same day use, some in money markets for instant access with at least some interest (this is probably what MS uses for its "cash" holding), some in CD's for timed access on a monthly or quarterly basis and higher interest than money markets, some in bonds for low-risk long-term holding with better returns than CD's, and some in various forms of equity for max returns. The last one may run into company policy constraints (what stocks or funds would MS own given its own business interests?), but the rest would just be standard large-scale cash management for a corporation. As an economic point, inflation generally hits hardest people with only modest savings (who effectively have no choice but to keep it as cash with no or minimal interest) and those with fixed incomes. Wealthy individuals and corporations generally just see higher interest rates and returns on their investments that rise with inflation. Most of them are still worse off if inflation exceeds about 3%, because inflation drives economic uncertainty, which in turn hurts economic growth and therefore their stock values don't increase as fast as they otherwise would have. The only true beneficiaries of inflation are long-term mortgage holders: if your $100,000 mortgage becomes only worth $20,000 in then current dollars due to inflation, inflation has effectively paid off 80% of your debt. This is the fear with nations running up large debts: at some point, they may need higher inflation as the mechanism to pay it off, which is very, very bad across multiple sectors of the economy.
  • I am sorry. Cash is Cash. There are strict rules about the definition of cash. Basically, any short term instrument meeting certain guidelines would be considered cash. I think short-term is 3 months or less. Since inflation is running at 6% plus and short-term interest rates are basically 0%, MSFT is losing value on its cash holdings. IN this case MSFT held the cash because market conditions can change and being able to deploy capital is necessary to pursue long term capital investment objectives. For MSFT and other high-tech companies, which may mean many acquisitions. Occasionally they can be large. MSFT holding 13% of its assets earning effectively 0% is wrong. So, they spent 7% of their assets on buying an asset they hope will generate high capital retruns.
  • ddn123, that's not quite correct from a financial or economic perspective, but I'm mostly with you in principle. To be fair, I don't know how MS has its holdings. When you say 3-month, I think you are referring to what balance sheets often list as "cash or cash equivalents," because pure cash is only that which is instantly liquid (checking accounts). Even a CD wouldn't count in that. However, to your point, short-term CDs are currently offering only about .6% (some reach above 1%, but that's for a multi-year CD). Money markets are running at about .5%. So, to your point, for their most liquid holdings, with an inflation rate of 7%, they would definitely be losing money to not put those to work somehow. HOWEVER, I'm certain (not from access to MS' books, just that it's standard practice) that it's only a small % of MS holdings are in this highly liquid form for this very reason. I'm sure they have most of these funds banked in something that's a little less liquid, but that provides better than 1% returns. Standard practice for a cash-flow positive company would be only to keep in cash or cash equivalents enough money to cover expenses for a brief period in case of a cash flow emergency. Everything else would be deployed somehow in at least a conservative investment, probably generating about 4-6%. Long term holdings may even be in equity markets generating 7% - 9% returns (or more).
  • 🤯 Officially, this is WOW!
  • Literally. 😉
    It might even come to XBOX by early '24.
  • Hopefully regulators will block this deal.
    'cause at the hands of Microsoft, franchises like Call of Duty will for sure be ruined. Also, I hope the woke m*rons at Activision that like to accuse people publicly without actually filling legal complaints will now turn on Microsoft's management. I'd love to see virtue-signalling Spencer or Nadella deal with the same sort of accusations Activision's management has dealt with from people who didn't actually file legal complaints with the public authorities which are the only entities empowered to deal with law breaking.
  • Wow, do I sense some negative vibes here? So please explain why Call of Duty will be ruined: Facts please not your biased view on reality.
  • A Nokia icon, really?
    Much more likely that one gets blocked.
    Rubber stamps are already primed.
  • I believe DJCBS is a lawyer in an EU country (or as at least knowledgeable in the law). He's no fan of MS, whom he blames for destroying Nokia as part of the Windows Phone collapse, but he often has interesting insights.
  • Sometimes, but as of late they are more like the Bleached trolling we get on the Windows articles.
  • Nokia was already doomed by the time MSFT showed up.
  • what an idiot
  • Hermione is that you?
  • so now Sony buys Square Enix?