The Impact of Microsoft's Acquisition of Activision Blizzard

Abstract

As people's incomes and technology improve, online games and metaverse concepts have become more mainstream and accepted. The purpose of this study was to analyze the impact of Microsoft's acquisition of Activision Blizzard on Microsoft itself and discuss the changes it will bring to society. This paper used the horizontal merger theory to discuss whether the merger will bring improvement to the Game Department of Microsoft. The SWOT analysis model was selected to qualitatively analyze the influence. According to the conclusion, the benefits of the acquisition were cleartaking over Activision Blizzard's game production process and expanding into more markets on top of it, while the potential threat was based on Microsoft's management capabilities and the feasibility of the metaverse concept. Therefore, Microsoft's acquisition of Activision Blizzard will be a very valuable acquisition case analysis. To summarize the acquisition mentality of large companies, this discussion process will help to learn the company's business decisions.

Discuss the Motivations and Risks Behind Microsofts Acquisition of Activision Blizzard

“…As technology advances, more and more devices can store bigger amounts of high-quality game data. The advent of cutting-edge technology, such as VR and AR technology has rekindled debates over the "metaverse," a term widely used in the gaming world [5].…”

“…For Microsoft, building the metaverse would bring tremendous benefits. At its core, the metaverse is closely related to gaming, focusing on prioritizing user experience [5]. A good user experience leads to monetization, creating a virtuous circle.…”

“…Xbox currently is unable to compete with Sony and Nintendo in the console game market. Although supply for PlayStation 5 and Xbox series consoles improved in 2022, Nintendo is likely to keep its sales dominance, with the new Switch OLED fueling console sales [5]. Therefore, Microsoft needs strong game developers to improve its game reputation and expand its market share.…”

“…These factors highlight potential risks for Microsoft in the post-acquisition phase, as they may face challenges in achieving the desired profit margins and maintaining a positive reputation in the gaming industry [5]. Therefore, in terms of financial risk, Microsoft needs to consider the acquisition at a 45% premium, as ultimately, Microsoft may bear financial losses due to the synergies not meeting expectations.…”

“…Activision Blizzard and other well-known gaming companies have been acquired by Microsoft. Microsoft faces the risk of being accused of antitrust violations by the federal government [5]. Microsoft's relationship with Activision Blizzard is not purely a vertical arrangement in the value chain, involving only upstream or downstream interactions.…”