Microsoft’s $70B Activision bid is the biggest cash deal ever, cementing gaming in the metaverse

Candy, crushed… Yesterday Microsoft announced plans to buy Activision Blizzard, which makes hits like World of Warcraft and Candy Crush, for about $70B — the largest all-cash acquisition in corporate history. For reference: Previously Microsoft’s biggest deal was its $26B LinkedIn purchase. Shares of Activision spiked 26% yesterday, after slipping 27% since California regulators sued the company over employee harassment in July.

• Microsoft’s gaming biz is now the third largest in the world after Tencent’s and Sony’s. Microsoft’s existing gaming biz (think: Xbox, Minecraft) brought in $15B last year, and its Xbox Game Pass monthly subscription now has 25M subscribers.
• Antitrust scrutiny is expected, but Microsoft is reportedly so confident the deal will close, it’s agreed to pay a $3B cancellation fee if it falls through.

When it games, it pours… Sales across the gaming industry boomed 27% during lockdown in 2020 and continued growing last year. Gaming revenues are forecast to jump from $180B in 2021 to $220B by 2024. And as gaming companies reach new sales levels, there’s been a flurry of consolidation: There were $117B worth of gaming acquisitions last year, and Grand Theft Auto maker Take-Two agreed to buy FarmVille creator Zynga last week for $12.7B.

THE TAKEAWAY

Games could be key to monetizing the metaverse(s)... As Microsoft races rivals like Meta (fka: Facebook) and Nvidia to build the first widely used metaverse, blockbuster games could help attract skeptics. Platforms like Fortnite and Roblox have already built massive followings and in-game virtual economies. CEO Satya Nadella said Activision “will play a key role” in building metaverse platforms for 3B global gamers.