Microsoft CEO Explains Why Buying Activision Blizzard Is The Right Move

Satya Nadella talks about the growth of mobile, the metaverse, reaching 4.5 billion gamers, and more with the help of Activision Blizzard.

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Microsoft CEO Satya Nadella has discussed the company's blockbuster buyout of Activision Blizzard, which hasn't been approved by regulators yet but could end up being one of the biggest gaming news stories in a long time. In a presentation this morning, Nadella laid out his thoughts on the buyout and spoke about why it's such a momentous occasion for Microsoft and Xbox as they look to the future.

Starting off, Nadella said Activision Blizzard's mission to "connect and engage the world through epic entertainment" lines up with what Microsoft is trying to achieve. "Together, our ambition is to bring the joy and community of gaming to everyone on the planet," Nadella said.

Microsoft is acquiring Activision Blizzard
Microsoft is acquiring Activision Blizzard

Nadella observed that gaming is the fastest-growing category across all entertainment, surpassing movies, TV, music, and more. In the past two years alone during the pandemic, Nadella said games have proven to be "critical" to help people stay connected even when they aren't physically together.

Microsoft is buying Activision Blizzard because it believes Xbox still has lots of room to grow, Nadella said. Right now, there are around 3 billion gamers in the world, and this is projected to reach 4.5 billion by 2030, he said. "We are seeing more players, more streamers, more titles and more new game publishers than ever before," Nadella explained.

There are problems, though, Nadella said. To begin with, there is "too much friction" between content, consumption, and commerce in the gaming landscape, the executive said.

"We need to make it easier for people to connect and play great games, wherever, whenever and however they want. Today, we face strong global competition from companies that generate more revenue from game distribution than we do from our share of game sales and subscriptions. We need more innovation and investment in content creation and fewer constraints on distribution," Nadella said.

Microsoft is trying to create a "river of entertainment" where "content and commerce flow freely, driving a renaissance" in gaming to help make games more inclusive and accessible for everyone, Nadella said.

"And together with Activision Blizzard, that's what we will be able to deliver," he explained.

Microsoft's efforts to remove traditional barriers in the way it wants to will become more important going forward with the rise of the metaverse, Nadella said.

"When we think about our vision for what a metaverse can be, we believe there won't be a single, centralized metaverse and there shouldn't be," he explained. "We need to support many metaverse platforms, as well as a robust ecosystem of content, commerce and applications. In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises, accessible on every device. And bringing fantastic entertainment together with new technologies, communities and business models is exactly what this transaction is about."

Another key component to this deal is the mobile element. Mobile games represent the largest segment of gaming already, Nadella pointed out, and Activision Blizzard's King division, which runs Candy Crush, gives Microsoft a bigger piece of the pie. Additionally, the deal helps improve the appeal of Xbox Game Pass, with "many" Activision Blizzard games both new and catalog, joining the library in the future.

"Together, we have one of the most diverse and robust content pipelines in the industry across every endpoint," Nadella said of Microsoft and Activision Blizzard.

Additionally, Nadella said there is great value in this deal regarding finding new players and connecting communities. Nadella pointed out that Activision Blizzard has a network of nearly 400 million monthly active players in 190 countries. "That reach builds on the strength of our own gaming community, from Minecraft and Xbox network to Game Pass," Nadella said.

"Together with Activision Blizzard, we will have one of the largest and most engaged communities in all of entertainment, and we’re excited to create new opportunities for both leading publishers, as well as for individuals and small teams to build and monetize their creations across this community," he said.

Another part of the deal is related to cloud gaming. Nadella said the buyout of Activision Blizzard should help Xbox's cloud gaming efforts reach new heights, and it might include bringing games like Overwatch and Diablo to streaming platforms as part of Game Pass.

Finally, Nadella alluded to the controversies at Activision Blizzard regarding sexual harassment and discrimination against women. He said company culture is his "number one priority."

"This means we must continuously improve the lived experience of our employees and create an environment that allows us to constantly drive every day improvement in our culture," Nadella said. "This is hard work. It requires consistency, commitment and leadership that not only talks the talk, but walks the walk. That's why we believe it's critical for the Activision Blizzard to drive forward on its renewed cultural commitments. We are supportive of the goal and the work Activision Blizzard is doing, and we also recognize that after close, we will have significant work to do in order to continue to build a culture where everyone can do their best work."

Microsoft's deal to buy Activision Blizzard is expected to close in FY2023, which runs July 2022-June 2023. Given the pending nature of the deal, executives from Microsoft and Activision Blizzard might not be very forthcoming with details about specifics pertaining to the future due to legal requirements.

Bobby Kotick, the CEO of Activision Blizzard who is accused of knowing about and covering up instances of sexual harassment, is reportedly planning to leave the company if/when the deal goes through.

Should the deal be finalized, Microsoft will take ownership of several massive franchises from Activision Blizzard, including Call of Duty, Warcraft, and Candy Crush, just to name a few.

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