Feature Article

How Microsoft's Bethesda Purchase Stacks Up To Other Big Industry Acquisitions

GameSpot may receive revenue from affiliate and advertising partnerships for sharing this content and from purchases through links.

Breaking down Microsoft's jaw-dropping $7.5 billion acquisition of the Fallout and Elder Scrolls company.

Microsoft surprised nearly everyone when the company announced it was spending a jaw-dropping $7.5 billion USD to acquire ZeniMax/Bethesda. With the buyout, Microsoft is getting all of the franchises published by Bethesda Softworks--including Fallout, The Elder Scrolls, Doom, and more--as well as their respective developers, making Xbox's first-party lineup the strongest it has ever been. It was a gigantic moment for both Microsoft and the entire gaming landscape, and the deal may well leave a lasting impact.

Money, Money, Money

The $7.5 billion that Microsoft paid to acquire ZeniMax is the company's biggest gaming acquisition in its history, and close to the biggest-ever in the video game industry overall. Before this, Microsoft's highest-profile and most expensive gaming-related buyout came in 2014 when it acquired Minecraft and developer Mojang for $2.5 billion. The ZeniMax deal is three times that, and the news understandably sent shockwaves through the industry

Microsoft has been on a hiring spree of late, and ZeniMax is just the latest effort in that department. In 2018, Microsoft announced it had acquired Ninja Theory (Hellblade), Playground Games (Forza Horizon, Fable), Undead Labs (State of Decay), and Compulsion Games (We Happy Few). Microsoft also announced at the time that it had started a brand-new studio in Santa Monica called The Initiative, with former Crystal Dynamics and Activision executive Darrell Gallagher leading the team for its new project.

Later that same year, in November 2018, Microsoft acquired both inXile and Obsidian, and then in 2019, Microsoft scooped up Double Fine. In total, Xbox now has a whopping 23 first-party game studios spread around the world, all of which are working on new projects for Xbox and PC platforms, in addition to potentially other consoles if Xbox boss Phil Spencer's recent comments are anything to go by.

Microsoft never disclosed how much money it paid for any game studio beyond Mojang and ZeniMax, but those purchases alone total $10 billion. As a further point of context and to illustrate just how gigantic Microsoft is, the company had more than $136 billion in cash on hand for its latest reporting period, which leads into the next point--a belief in gaming and a willingness to spend on it from Microsoft's top executives.

Please use a html5 video capable browser to watch videos.
This video has an invalid file format.
Sorry, but you can't access this content!
Please enter your date of birth to view this video

By clicking 'enter', you agree to GameSpot's
Terms of Use and Privacy Policy

Faith At The Top

Spencer has repeatedly said in recent years that he has the support of Microsoft CEO Satya Nadella and, perhaps more importantly when it comes to the books, Chief Financial Officer Amy Hood, as it relates to his bold ambitions for gaming at Microsoft. With $10 billion-plus spent on studio and franchise acquisitions in the past decade, Microsoft clearly believes in gaming as a growth category within the giant company. But you may recall that it wasn't always this way. After the stumbles of the Xbox One under the leadership of executive Don Mattrick, many believed that the Xbox division of Microsoft might be up for sale. Even Microsoft co-founder Paul Allen's investment firm called on Microsoft to consider putting Xbox on the chopping block. With Spencer now leading the Xbox division, things have changed, and Microsoft is positioning itself for success in the long-term, if things go according to plan.

Gaming consoles don't historically make any money--they are understood to be loss-leaders at launch--but the real money in the games business comes from software and services. Microsoft's studio and franchise acquisitions in recent years are all about that, specifically driving people to subscribe to Xbox Game Pass.

As Bloomberg analyst Matthew Kanterman said on Twitter, if Microsoft can sign up 10 million more Game Pass Ultimate subscribers, the $7.5 billion deal to buy ZeniMax pays for itself in four years, and potentially faster if Microsoft raises Game Pass subscription prices. It's worth noting that Xbox Game Pass currently does not make money, but few major subscription services do in their early stages. For now, it's about ramping up and laying the foundation for the future.

A Wider View

There are no direct, perfect, or complete comparisons to be made between Microsoft's deal for ZeniMax and other similar acquisitions because the deals involve many layers of complexities and nuance, and that's only considering what we know publicly. That being said, here is a quick look at some of the other major video game and entertainment acquisitions where we know the details about the sale price.

In 2007, EA paid $860 million to acquire Mass Effect developer BioWare and Mercenaries studio Pandemic. BioWare would go on to strike gold with the Mass Effect sequels and the Dragon Age franchise, but EA closed Pandemic in 2009. In 2011, Electronic Arts acquired Bejeweled developer PopCap in a deal worth $650 million in cash, and many hundreds of millions more in incentives. In 2016, EA returned to its checkbook again to purchase Titanfall developer Respawn for $141 million in cash and millions more in performance-based bonuses and equity.

Another gigantic deal on the gaming landscape was for casual games company Big Fish Games. Churchill Downs, the horseracing company that operates the Kentucky Derby, paid $885 million to acquire Big Fish Games in 2014. Churchill Downs sold Big Fish in 2018 to the Australian gambling company Aristocrat Leisure for $990 million.

Please use a html5 video capable browser to watch videos.
This video has an invalid file format.
Sorry, but you can't access this content!
Please enter your date of birth to view this video

By clicking 'enter', you agree to GameSpot's
Terms of Use and Privacy Policy

The biggest acquisition in the history of video games, however, came from Chinese internet company Tencent. In 2016, Tencent paid $8.6 billion to acquire Clash of Clans developer Supercell. Coming in below that and Microsoft's deal for ZeniMax was Activision's purchase of Candy Crush developer King. The Call of Duty company paid $5.9 billion to acquire King in 2015, and Activision Blizzard's bottom line has reaped the benefits of this with billions in microtransaction spending every year.

Another gaming acquisition that crossed the billion-dollar threshold was Facebook's $2 billion deal for Oculus in 2014. And one of the only other gaming deals above $1 billion came earlier in 2020 when Zynga acquired the mobile game company Peak for $1.8 billion.

Another major deal of note was Activision Blizzard's buyout from Vivendi, which was valued at around $8 billion.

Looking outside of the video game industry, Disney paid around $4 billion to acquire Marvel in 2009 before splashing out about the same number for Lucasfilm/Star Wars in 2012.

What It's All About

Things looked grim during the Xbox One days with the company's poor messaging around the console, the closure of an esteemed studio in Fable developer Lionhead, and the cancellation of Scalebound. Spencer recently acknowledged these troubling times in an interview with Fast Company. "The Xbox team, being transparent, had lost some confidence as to why we were there," he said. But things are different now.

Microsoft has been criticized over the years for a lack of first-party games to match what Sony and Nintendo have achieved with their own in-house titles. Microsoft had fewer internal studios than Sony at the start of this console generation, but now the scales have tipped in Microsoft's favor due to its buying spree. With more than $10 billion spent on games and studios in the past decade, Microsoft is clearly very interested in getting back on top and bringing more people into the Xbox family, and the way you do that is through games. Lots and lots of games, across different genres to appeal to a wide audience--and this strategy funnels back into Xbox Game Pass.

Microsoft already built Xbox Game Pass into a compelling offering (and one that will be further bolstered with EA Play this holiday season), but adding ZeniMax's back catalog and future games like The Elder Scrolls VI, Starfield, and others into the mix further increases the appeal of the subscription service. Even assuming a price increase for Game Pass, which seems likely at some point, the offering will probably remain among the most value-rich options across gaming.

Content is king in driving sales of dedicated game hardware, but Microsoft's major spending in recent years also speaks to Spencer's stated belief that games should be playable on more devices in more places, especially beyond consoles. The $300 Xbox Series S console, and even the relatively moderately priced Xbox Series X at $500 (which is less than the Xbox 360 and Xbox One at launch when you factor in inflation), will help drive adoption of those systems out of the gate, and this is to say nothing of the mobile phone-style Xbox All Access program where you can buy into a next-gen Xbox starting at $25/month. But you can't reach 2 billion gamers on consoles alone. That is why Microsoft is pushing so hard on Xbox Game Pass and xCloud, which can stream any game to a smartphone or tablet. In fact, Spencer has gone on record to say he wants xCloud available on "every screen." The smartest way to encourage people to sign up is to give them content they want, and lots of it, and Game Pass--now with Bethesda's rich catalog--delivers that in spades.

It is still early days, and plenty of questions remain regarding Microsoft's $7.5 billion buyout of ZeniMax, but one thing is certain: this was a watershed move for Xbox and a bold strike toward rekindling the Xbox's glory days and driving the company into the future.

Got a news tip or want to contact us directly? Email news@gamespot.com


Eddie Makuch

Eddie Makuch mainly writes news.

Back To Top