Microsoft spent two years acquiring Activision Blizzard. For Xbox CEO, that was the easy part, ET Telecom

Written by Matt O’Brien

After two years of co-piloting the largest acquisition in video game history and overcoming one challenge after another, Xbox CEO Phil Spencer is embarking on his next quest. That’s what makes Microsoft’s acquisition of Activision Blizzard worth the trouble.

Microsoft, which owns the Xbox gaming system, on Friday closed a $69 billion deal to buy game maker Activision Blizzard, overcoming global opposition from antitrust regulators and rivals.

It was a career-defining moment for Spencer, who first joined Microsoft as an intern in 1988 and has been at the helm of Xbox since 2014. After years of lagging behind rival Sony’s PlayStation, acquiring Activision’s collection of popular game titles gives Microsoft a rare chance to catch up. .

“His work just started today,” DA Davidson technology strategist and analyst Gil Luria said after the deal closed. “All he’s done is prepare today to actually integrate the business.”

And it marks the end of an era for Activision Blizzard CEO Bobby Kotick. He helped buy the company out of bankruptcy and has led the Southern California maker of Call of Duty and other blockbuster franchises since 1991. Kotick said he would support the transition through the end of the year.

When Microsoft privately approached them about acquiring the company in 2021, Activision Blizzard was still reeling from worker protests, lawsuits, and government investigations over allegations of workplace harassment and unequal pay against women. .

When the companies announced their plans to merge in January 2022, Microsoft CEO Satya Nadella made it clear that it was “important for Activision Blizzard to move forward” with efforts to improve workplace culture.

That was just the beginning of Microsoft’s quest to bring home this deal. After negotiations with Spencer stalled, top rival Sony raised concerns about losing access to the Call of Duty series to regulators around the world. The strongest opposition came from U.S. antitrust enforcement officials, who have been emboldened by President Joe Biden to take a tougher look at big tech deals, and who approved the deal only after Microsoft agreed to concessions on Friday. British antitrust enforcement officials were disappointed.

“Microsoft didn’t have a choice. If it wants to be competitive in the long term with Sony and the PlayStation platform, it needs to offer stronger content,” Luria said.

But “in hindsight, we should have read the writing on the wall in terms of the difficulty of closing the deal,” Luria said. “They needed to make a deal to stay competitive, but knowing what they know now, they might have done it differently.”

A key moment came in June, when a federal judge considered the Federal Trade Commission’s attempt to block the merger pending further review. In an unusual move for a CEO who telegraphed the importance of the deal, Mr. Spencer spent the better part of two weeks conferring with Microsoft’s lawyers in the dock of a San Francisco courtroom. A judge ultimately dismissed the FTC’s claims, but the FTC is still seeking to terminate the deal.

George Zigiashvili, senior principal analyst at research and advisory firm Omdia, said Microsoft’s success in integrating Activision’s business is “not guaranteed, especially given its mixed acquisition history.” Last year, the company spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, makers of The Elder Scrolls and Fallout.

Red Fall and Starfield, the two major games released this year by Microsoft through its merger with Bethesda, “had a mixed response at best,” Gigiashvili said. “However, with globally popular game series like Call of Duty now under its umbrella, the company is in a much better strategic position.”

Another challenge for Microsoft is overcoming the employee problems that plagued Activision before the acquisition.

As of the end of last year, Activision Blizzard had 13,000 employees, about 72% of them in North America, according to regulatory filings. Microsoft has already pledged to remain neutral if its roughly 10,000 workers in the U.S. and Canada seek to unionize. This is part of a 2022 agreement with the Communications Workers of America that aims to address U.S. political concerns about the impact of the merger.

“It’s a new day for Activision Blizzard employees,” CWA Chairman Claude Cummings Jr. said in a statement Friday.

“More than two years ago, Activision Blizzard studio workers gained national attention through strikes and other protests over discrimination, sexual harassment, pay inequality, and other issues they faced on the job. ,” Cummings Jr. said. “Their efforts to unionize have been met with illegal retaliation and attempts to delay or prevent union elections. These workers are now free from interference from management. , now free to join our trade unions through a fair process.”

“We are setting the bar high when it comes to providing the most inclusive and welcoming experience for our players, creators, and employees,” Spencer said in a Friday welcome email to Activision employees. I want to repeat that.”