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The deal, if completed, would bring together Microsoft, which owns the Xbox game platform and Xbox Game Studios (owner of Bethesda Softworks and 343 Industries, among other game publishers) and Activision, maker of the Call of Duty, Warcraft and Tony Hawk franchises, among others.
Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony, when and if the deal closes. The deal is the largest in Microsoft’s history, with the companies targeting a close in 2023.
“We need more innovation and investment in content creation, and fewer constraints on distribution,” Microsoft CEO Satya Nadella said in a conference call Tuesday morning. “Our vision is for a river of entertainment where content and commerce flow freely.”
The deal comes as Activision Blizzard grapples with a #MeToo reckoning, spurring dueling investigations from the state of California and federal agencies. The company was accused of rampant sexual harassment and discrimination involving alcohol-fueled parties, male employees allegedly joking about rape, a female employee who died of suicide after colleagues shared a nude photo of her, and naming one executive’s office the “Cosby Suite” because of his reputation for making unwanted sexual advances.
Those claims led to a mea culpa from CEO Bobby Kotick in October, with the executive writing to employees: “Over the last decade, as we’ve brought in new companies, grown our workforce, and expanded our business, we believed we had the systems, policies and people in place to ensure that our company always lived up to its reputation as a great place to work. Clearly, in some vitally important aspects, we didn’t. The guardrails weren’t in place everywhere to ensure that our values were being upheld. In some cases, people didn’t consistently feel comfortable reporting concerns, or their concerns weren’t always addressed promptly or properly. People were deeply let down and, for that, I am truly sorry.”
Microsoft says that Kotick will continue to serve as Activision CEO after the deal closes, adding that “he and his team will maintain their focus on driving efforts to further strengthen the company’s culture and accelerate business growth.” However, Kotick and the Activision team will report to Phil Spencer, CEO of Microsoft Gaming.
“As CEO of Microsoft, the culture of our organization is my number one priority,” Nadella added on the call Tuesday. “This is hard work, it requires consistency, commitment and leadership that not only talks the talk but walks the walk.”
Nadella added that Microsoft will support the game publisher as it pushes forward in its culture change, even before the deal closes.
The tech giant said that mobile gaming is a significant part of the deal, with Microsoft not a particularly competitive player in the space, in contrast to Activision, which owns games like Candy Crush. Microsoft also says that if the deal closes, Activision’s games would be incorporated into its Game Pass subscription service, giving it a significant boost. Activision’s Call of Duty franchise, with its annual release cadence, would be a particularly compelling addition.
“We will bring as many Activision Blizzard games as we can, … including both new games and games from Activision Blizzard’s incredible catalog,” Nadella said.
But the deal is also part of a larger push into the “metaverse.”
Speaking on the call, Nadella said that removing barriers on distribution “will only become more important as the digital and physical worlds come together and the metaverse develops.”
Activision’s Kotick, meanwhile, said on the call that “our talent and our franchises are critical components in the construction of a rich metaverse.”
“The race to do this is accelerating, and the resources required for success are enormous,” Kotick added, saying that Microsoft has the resources to do so.
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