Microsoft Triumphs in Activision Blizzard Acquisition

Microsoft Wins a high-profile FTC Court Case battle, greenlighting its acquisition of Activision Blizzard in the US

In an unexpected turn of events, Microsoft has emerged as the victor in its high-profile court battle against the Federal Trade Commission (FTC), granting the company the green light to proceed with its acquisition of Activision Blizzard in the United States. The ruling dealt a significant blow to Sony, which had vehemently campaigned to block the deal by presenting evidence during the trial.

The FTC's lawsuit sought to halt the merger’s approval, attracting considerable attention amidst the ongoing rivalry between Xbox and PlayStation. The legal battle unfolded just as reports surfaced that all parties involved were preparing to finalize the deal. With the lawsuit now resolved in favor of Microsoft, the approval process for the acquisition in the U.S. is expected to proceed in due course.

Breaking: Microsoft wins US court case to buy Activision Blizzard in loss for FTC. Story incoming.

— Cecilia D'Anastasio (@cecianasta) July 11, 2023

Credits: thebusinessofesports

Several noteworthy facts emerged throughout the trial, shedding light on various aspects surrounding the acquisition. Here's a summary of the key revelations:

• Mobile Expansion: Microsoft's drive to expand its gaming business on mobile devices played a crucial role in its decision to acquire Activision Blizzard. Recognizing the importance of capturing mobile customers for Xbox, Microsoft acknowledged that revenue from mobile gaming was growing faster than that from PC or console gaming.
• Consideration of Other Companies: Prior to selecting Activision Blizzard, Microsoft explored the possibility of acquiring other gaming companies, including Zynga, Niantic, Sega Sammy, and Square Enix, as revealed in testimonies and case documents.
• Interest in the Asian Market: Microsoft's Xbox consoles have struggled to gain popularity in Japan, where Nintendo and Sony dominate. In an analysis conducted in 2019, Microsoft evaluated that acquiring Square Enix would provide market relevance in the region and help reach a broader audience.
• Sony's Competitive Tactics: Microsoft executives testified that Sony had paid game developers fees to discourage them from releasing games like “Ghostwire: Tokyo” and “Deathloop” on Xbox. Microsoft's acquisition of Activision Blizzard would eliminate the need for such incentives.
• Content Concerns: The availability of Activision Blizzard's games on PlayStation consoles was a central point of contention. While Microsoft confirmed that Call of Duty games would remain on PlayStation, discussions regarding other Activision content were inconclusive.
• Microsoft's Long-Term Goals: Internal documents revealed Microsoft CEO Satya Nadella's vision of generating $500 billion in revenue by the 2030 fiscal year, focusing on growth in the security, compliance, identity, management, and communication sectors.
• Challenges in Hardware Access: Microsoft faced challenges in optimizing its Minecraft game for Sony's PlayStation 5 due to delays in receiving development kits, affecting the game's performance compared to other developers' titles.
• Deal Approval Process: Microsoft's finance chief, Amy Hood, disclosed that she provides final approval for proposed deals below a specific dollar amount, while deals valued above $500 million require approval from the company's board.
• Negotiating Leverage: Microsoft aimed to secure favorable revenue-sharing terms for Call of Duty games on its Xbox consoles. Activision Blizzard CEO Bobby Kotick expressed that if Microsoft failed to offer a better deal than the typical 70-30 split, the games might not continue to be available on Xbox.
• Sony's Shifting Expectations: Sony CEO Jim Ryan initially expressed confidence in the continued availability of Call of Duty and other Activision Blizzard games on PlayStation consoles. However, as the trial progressed, Ryan's confidence appeared to wane.
• Game Pass Evaluation: While Activision Blizzard considered placing games on Microsoft's Game Pass subscription service in 2020, Kotick deemed it an unsustainable long-term business model and opted not to pursue the option.
• Cloud Gaming Challenges: Microsoft's cloud-based gaming option, included in the Game Pass Ultimate service, has not gained significant traction and remains unprofitable. Feedback indicates that it is not a satisfactory substitute for traditional gaming platforms.
• Azure Infrastructure Scale: Internal memos highlighted Microsoft's focus on the growth of its Azure public cloud, a closely monitored metric for investors. Figures indicated significant infrastructure revenue for the 2022 fiscal year, aligning with estimates provided by analysts.
• Security Rivals: Case documents revealed that Microsoft tracks its cybersecurity operations using various security companies, including Okta, CrowdStrike, Proofpoint, and Symantec. These metrics contribute to performance assessments among Microsoft's top executives.

The resolution of the FTC court case marks a significant milestone for Microsoft, as it clears the path for the company to proceed with its plans to acquire Activision Blizzard. This acquisition has the potential to reshape the gaming industry and further intensify the competition between Microsoft's Xbox and Sony's PlayStation in the gaming console market. With the legal barriers removed, the attention now turns to the acquisition's completion and its subsequent impact on the gaming landscape.