Microsoft is nearing a deal to buy Activision Blizzard, the video game maker of “Call of Duty” in a deal that would value the company at around $70 billion, according to media reports. The transaction is an all-cash deal for $95 per share.
Video games are a multi-billion-dollar business. In 2020, revenue from the worldwide PC gaming market was estimated at almost $37 billion in the U.S. and the mobile gaming market generated an estimated income of over $77 billion, according to Statista. Activision owns two of the most popular and lucrative games, Call of Duty and Candy Crush.
Microsoft is already in the top five video game makers by revenue with Sony, Tencent and Nintendo in the first spots. This deal could position the company near the top, right behind Sony. Microsoft is probably the Big Tech company, including Apple, Amazon, Facebook and Google, that is investing most heavily in this industry. But the other companies are not leaving this industry completely behind. Amazon bought Twitch in 2014, a video game streaming service, where people can watch others play. Apple and Google generate billions of dollars each year in App Store fees from consumers paying for games and in-app purchases. Meta (formerly Facebook) is investing in augmented reality with its Oculus division, producing virtual reality headsets. Even Netflix is trying to leverage its customers reach to launch new videogames on demand.
The regulatory assessment of Microsoft-Activision may bring a new analysis about what are the relevant markets, how these markets are related and whether other Big Tech companies should be included in the analysis. Companies are expected to file the deal in several countries and antitrust investigation may be conducted in parallel. Past experience in similar deals suggest that European Union and U.S. authorities will collaborate during the analysis.
At this point it is unclear if the companies will face significant antitrust concerns, but the review may be complex because regulators may need to test the market definitions. Regulators may not only need to investigate the differences between PC games, console and mobile games, but they may also consider if future developments in virtual reality should be included and if so, how they may be defined. While the metaverse may be too far from a reality to be included in the analysis, it may not be totally ignored.
Microsoft CEO Satya Nadella has already shown interest in metaverse, “when we think about our vision for what a metaverse can be, we believe won’t be a single, centralized metaverse,” said Nadella.
In addition to the limits of market definitions for video games, regulators may also need to look at the different ecosystems of the big tech companies and how they interact. Big Tech companies don’t operate in silos and the data they obtain with the different acquisitions may give them new opportunities to expand to adjacent or new businesses. In this regard, regulators may seek guarantees from the companies that consumers’ data won’t be used for advertising purposes or in other parts of the business.
