It’s been a busy time for game acquisitions. Companies eat each other, alliances shift, and Game Pass content queues grow and multiply rapidly. But what are these offers medium if you drill beyond their easy-to-understand exteriors?
Microsoft didn’t spend nearly $70 billion on Activision Blizzard just to get access to the enhanced title for Game Pass. Sony didn’t buy Bungie just to have Destiny. There are layers to these purchases that extend well beyond the superficial components, and even beyond the less apparent angles. In other words, there’s probably even more depth to recent purchases than just Microsoft winning King over for mobile efforts and Sony securing the talented company known for spawning famous FPS franchises.
We called in experts to find out what real the hidden benefits are from the two recent mega-acquisitions and insight into which company might be gobbled up next.
The following target
With two massive buys happening in close proximity to each other, the questions are, “Why are they happening? nowand “Who’s next?”
Lewis Ward, IDC research director of games, esports, and virtual reality/augmented reality, said the acquisition craze could very well die down from here.
“I don’t expect Sony or Microsoft to make another big acquisition this year,” he said. “These deals take time to come together and will need to be digested internally. A few private studios can be snapped up, but I doubt either company will make another multi-billion dollar studio/publisher acquisition. dollars in 2022, not to mention a deal valued in the tens of billions.”
As for when the two massive deals have already graced 2022, Ward didn’t think the events were directly linked. He pointed out that deals of this magnitude are usually the result of at least nine months of work and are usually not announced until the paperwork is complete. That said, he felt the Microsoft buy had signs of being a little more hasty.
To preface what comes next: remember that before Microsoft made its announcement, Activision Blizzard had been embroiled in a sexual harassment nightmare involving lawsuits, worker strikes, and a seemingly endless series of toxic claims about the workplace. All of these things happened with Activision Blizzard CEO Bobby Kotick at the helm.
“The deal was announced in mid-January,” Ward said. “The fact that Activision Blizzard’s CY 4Q 2021 results would miss investors’ expectations in early February was clear to Activision Blizzard executives at the end of last year. Investor Day in June. There are very good chances that Mr. Kotick was forced out of that meeting. This deal saved his bacon. If you get ousted, you get nothing. That way he’s supposed to get $390 million.”
“It was unimaginable that Activision Blizzard would be acquired, yet we are there.”
Ward said those factors were likely a key part of the “why now” angle of the deal, as opposed to what was likely a more classic acquisition process with Sony and Bungie.
Forrester analyst Will McKeon-White, for his prediction of the next company that could be bought, said it’s hard to pinpoint the next target right now.
“The definition of the acquisition target has changed dramatically,” he said. “It was unimaginable that Activision Blizzard would be acquired, yet we are there.”
He provided criteria on what might determine the next company ready to sell. “If you don’t have success or shortfall, it can shut down the whole publisher,” he said, pointing out that a company that would want financial isolation and the associated creative benefits of such protection would make a good competitor, citing Capcom and Sega as examples.
The company itself should also offer benefits to its buyer in the form of unique form factor capabilities and a diverse intellectual property (IP) portfolio. McKeon-White cited EA as a company that would fit that end of the equation.
The Game Pass rival
The rumored rival Game Pass from Sony looms large over the conversation. While this speculated service probably wasn’t the source of a Bungie acquisition, it was certainly part of the conversation around building a wallet to compete with Microsoft’s ever-expanding Game Pass lineup. .
This could easily be one of the less discussed benefits of buying Sony. We know the tech giant is terminating Destiny and a team of world-class first-person shooter (FPS) game developers, but could that also be Sony figuring out how it can properly compete with Game Pass? ? Even though Destiny and everything else Bungie is cooking up remains cross-platform (which Ward said he expects it to be), the benefits of having that studio directly under his control can’t be understated. Timed DLC, exclusive content, early access – the possibilities are limitless.
Two Game Passes could undo the original $60-70 price model.
This is where the real food for thought comes in: if Microsoft already has a large number of publishers and developers putting their games on Game Pass on day one, then Sony’s Game Pass rival should logically sweep all titles high level that remain to remain competitive. In other words, outside of Nintendo’s releases, we could very well consider the $60-70 endgame to be the only way to access a new title, because everyone might soon be able to buy a sub. Microsoft sailor or Sony Game Pass. for very cheap (or free, if you use Bing).
Publishers have become aware of the possibilities of lowering admission fees or simply going all-in on free models, a fact that McKeon-White highlighted in his analysis of the current gaming landscape. “The most successful titles in [this] the last half-decade have been free to play,” he said.
With that in mind, it’s not like the $60-70 model is going to disappear overnight. McKeon-White cited Ubisoft as an example of how a publisher could have a hand in every pot. It has games on Ubisoft Connect, Epic Games Store, and it recently launched day one of Rainbow Six Extraction on Game Pass. If we overlook its exclusion from Steam, Ubisoft is essentially saying it will meet customers where they are, even if that means Ubisoft isn’t earning $60 per person directly.
“We could see that lowering the price of admission as [publishers] see the value there,” McKeon-White said. He also had this to say when asked if he foresees Sony’s hypothetical Game Pass competitor coming to PC: “It would be smart if it was the case. “
We’ve seen Sony start to embrace modern PC games on Steam, and technically Sony has already given PC gamers Marvel’s Spider-Man and Uncharted games via PS Now, so it’s not like the company is scared to tango with the platform. Given the success of Microsoft’s Game Pass and the best Xbox Game Pass games, perhaps Sony will copy this format and allow the PC to be an all-in-one solution (without Mario).
the Proving ground
While most people will have already realized the more obvious benefits of Microsoft buying Activision Blizzard, including big gains in the ill-defined “metaverse” space, access to Call of Duty, and other world-class IPs, as well as increased strength in the mobile sector. thanks to King, the nearly $70 billion purchase is more than meets the eye. Mainly: what does this do for Azure?
Although Activision Blizzard had a big problem with Google Cloud for cloud hosting infrastructure, one wonders what will happen next. Does this deal die prematurely or does it run its course? Either way, it’s ultimately almost inevitable that Microsoft will inject Azure into the mix. McKeon-White commented on this topic, pointing out a major potential benefit of the deal that isn’t recognized by everyone.
“It will certainly allow Microsoft to experiment internally with what constitutes the best technology services for a game provider on an ecosystem scale that may not have been fully comparable before,” he said. Once Microsoft figures out how to leverage Azure as part of Activision Blizzard properties as well as its own, at that point it will have an incredibly strong piece of portfolio to show other companies when asked: Can Azure handle the task? “As a demonstration of pure technological power, the Azure implications of this acquisition could be significant.
The positions behind the purchases, In summary
Long story short, Microsoft and Sony’s recent moves could be setting up much bigger things than most have already speculated. Sure, Microsoft’s Game Pass, the power of mobile gaming, and the “metaverse” are gaining momentum through Activision Blizzard, and Sony is getting a talented studio and a popular cross-platform FPS. But there are more benefits to each that lurk below the surface.
Sony’s purchase of Bungie could very well fuel the fire of an upcoming rival Game Pass service, which could signal the end of day one games at $60-70. And Microsoft’s purchase of Activision Blizzard could very well prove to be the ultimate testing ground for Azure, which has become a top priority for Redmond in recent years.
While these larger implications are speculation at this time, they all grew out of logic and precedent. Don’t be surprised if the gaming landscape changes even more drastically in response to these two acquisitions that have already shaken the foundations of the industry.