Microsoft Buying Activision-Blizzard And What The Future (Could) Hold

It’s not news I expected to wake up to, but news all the same.

Today, Microsoft announced a tentative deal with Activision-Blizzard to acquire the company in a deal valued at $68.7 billion USD. The deal will be subject to a lot of waiting and pending regulatory approvals – in the US, such deals must be legally reviewed for anti-trust concerns and to ensure that the merger clears a legal bar of not being against the public interest (vaguely defined as I am not a lawyer and this is not legal advice, but basically if the deal gives Microsoft too much of the software or gaming market, it could see increased scrutiny at a minimum or additional requirements). The deal is also subject to closing conditions defined by the two entities and shareholder approval from ABK shareholders, although given that the deal’s valuation of ABK is built on an assumption of a $95 share price (which represents an increase of $13 from even today’s current price, which is up over $17 on the news), it seems likely they’ll approve. Given the anemic state of US anti-trust in the first place, it seems like it will go through easily enough.

There’s a lot of analysis of the business side of it, frankly, it’s interesting to me but isn’t my strong suit and so I won’t come through and attempt to analyze much of that. What I will look at is the interesting potential implications for the games under the watch of ABK and what Microsoft’s priorities are as stated in their press release.

The Big Question – Is ABK’s Awful Leadership Done For?

(Editor’s Note – I added this before the news broke that Kotick was pretty much assuredly out following the close of the deal next summer. So…he’s gone, but a lot of the points here remain valid, and past this section, I wrote aware of this news, so there is a shift!)

This is the nearly $69 billion dollar question most people are asking – if ABK is folded into the Microsoft Game Studios umbrella, what happens to your Bobby Koticks and his ilk? Well…it’s hard to say.

On the one hand, the verbiage around Kotick’s role in the merger is vague in a way – he’ll be “available as needed” and once the deal closes, “the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.” It’s not necessarily the case that Kotick is or is not gone once the deal is done, as while having layers of leadership abstraction isn’t really a case study in good corporate governance, it also isn’t unprecendented, and tech companies love redundant layers of leadership. At the same time, his role would be vestigial, as the responsibilities he does have (however poorly he executes them in terms of morals) would no longer be needed at a studio that is not independent. However, Zenimax (parent of Bethesda Softworks and the entity Microsoft purchased to gain those franchises) retains its leadership in a world post-Microsoft buyout, so it is hard to say.

What can be said is that if you’re hoping for karmic debt to be piled upon Kotick’s door for the things he did and enabled, well…I’d suggest not holding your breath. While Microsoft successfully acquiring ABK opens the door to that in a way that it is firmly closed to today by dissolving the ABK board upon merger completion, the expectation is that the deal will not complete until the end of Microsoft’s fiscal year 2023 (in the summer of that same calendar year). In the meantime, Kotick will remain on. Kotick was also a part of the PR blitz with business and mainstream news outlets today discussing the benefits of the deal. It’s also hypercapitalist hellscape America – punishment isn’t a thing that exists for rich people (unless you have sunk or threatened to sink other rich people), and under the current terms of Kotick’s employment agreement as published in ATVI investor materials, Kotick has a post-merger exit package that gives him nearly $300 million dollars if he’s ousted in a change-of-control scenario. If he goes, and it isn’t a given that he does, then he makes out like a bandit, with a diamond parachute worth almost 1/3rd of his current approximate net worth.

The best hope to have right now, grounded in reality, is that Kotick’s toxic influence on the company as a whole is tempered by the overriding guidance of Microsoft Game Studios, which generally seems to have a better corporate culture (with some exceptions we’ll discuss in a moment). If you’re hoping this is a punitive moment of reflection – place those hopes elsewhere, because in business, Kotick just reaffirmed that he is a competent slimy businessman. In the wake of a torrent of bad news, he’s just pumped ATVI’s valuation way back up, covered over a lot of the bad press with talk of the merger, and has successfully diverted the core talking point of discussions about the company from being focused on the actual acts down to a vague sense of badness with the hope of his removal taking that discussion in a different direction than it has been going in. He’s an absolute fucking sleazeball and money monster, but to shareholders, he’s a hero now, and provided that they meet their end of the deal with Microsoft to complete the handoff without having other landmines in the way (concealing more info about the investigations or hiding other allegations), he’ll parachute off into the sunset with an exit package worth more than most of us will make in our lifetimes combined.

As for the other leaders? Well, that remains to be seen. Zenimax’s structure has been largely unaffected from most data I could find since their acquisition, although there are likely to be redundancies that will end up eliminated on the higher-up end of the totem pole. I’m not holding my breath for drastic leadership changes, but I am at least marginally hopeful that a further check on awful leadership will bring some semblance of workplace comfort to the employees there and will push back on the worst instincts of your Koticks, Townsends, and Bulataos.

The Sad News Part – Microsoft Isn’t Your Friend Either (Duh)

Microsoft has done a lot to shape their reputation in the gaming space as a plucky, friendly number 2 in the console wars. They’ve opened up subscription gaming through Xbox Game Pass, released multiple tiers of current-gen hardware designed to offer an affordable entry point that meets the requirements of most households with basic 1080p HDTVs, and they have a mix of adored franchises like Halo, Forza, and Gears of War that don’t seem to suffer from tampering or excessive awful monetization. In fact, I genuinely like and appreciate Microsoft’s Game Pass model – instead of parceling games out for individual purchase and expecting you to buy games at $60 a piece and DLC for those games, you can just get Game Pass and play the base content of a ton of games, including day and date new releases, and on PC this generation, it means day and date access to new Xbox Series exclusive titles like Halo Infinite. It’s a rather great model, all told, and the kind of monetization strategy that I think is better.

However, Microsoft, as any big corporation, is not your friend. They indulge a lot of the penny-pinching, bottom-line serving instincts that ABK has been hammered over – keeping employees mired in temporary employment (we have a Microsoft office here, and nearly its full workforce is temporary employees), layoffs designed to hit stock market performance goals and raise the stock price at the cost of thousands of employee’s livelihoods, and while the Xbox division has a plucky “aw shucks” attitude about them, they kind of have to have that – they are being beaten by Sony and trying to build goodwill as a brand so they can take over, which studio acquisitions like Bethesda and ABK serve to help with.

Microsoft seems more chill these days, but they’ve continued to push into subscription software models so you never really own anything, Windows remains a compromise choice that is popular simply for inertia (I’m not a Linux guy and definitely not a Mac guy he says looking at his 10 year old Macbook Air, but Windows is admittedly not a piece of software I think favorably of), and Windows 11 has shown that they aren’t content to simply keep updates in the pipeline for existing Windows users and avoid making huge shifts that require new, spendy licenses over time (there was a genuine train of thought with Windows 10 that they were done making major Windows versions and would release updates in perpetuity without requiring a new major version and accompanying new license).

The one place Microsoft has a clear leg-up is that they aren’t currently being scraped over the coals for a brazen environment full of sexual harassment…

…oh

…well then. Carry on.

The Sad News Redux – Blizzard’s Cultural Rot Is Internal and Always Has Been

A common refrain in the wake of last summer’s revelations about Blizzard’s culture was that Activision was a corrupting influence – and that became the way a lot of people rationalized their prior or continuing support for Blizzard. I’m not going to throw shade at that – I get it and it comes from an understandable place – but the signs are that Blizzard’s rot was long-established and pretty deeply rooted, and if you think that Microsoft buying out the whole entity changes that, it is an assumption with no real grounding.

Parent companies can and do exert influence, and they often do so at a high level – we need a release to hit these goals, to make this amount of money, etc – but I would push back on the idea that there’s an Activision bean counter really actively staring down the development team making them design bad content. There’s a clear profit motive (say, if this rep grind that most players will need to do to remain competitive requires 28 days, that would push at least an extra month of sub time!) but that is a broad strokes goal – increase revenue by x%, increase subscriber retention by y%, etc.

On the more substantial front of that critique, a lot of people really want to believe that Blizzard became a swamp of sexual harassment and discrimination on the back of the Activision buyout back in the mid-2000s, but the truth is muddier than that. A lot of the signs we’ve gotten point to Blizzard having always been…well, this. Mike Morhaime made a point of papering over a lot of the news during his tenure as CEO of Blizzard, and recruiting videos from as far back as the late 90s show that Blizzard wasn’t a great culture with acceptance of women. Activision only changed that in terms of having a permissive parent company to oversee things, but it’s not as though they stuck sludgy tendrils into Blizzard and made them that way. They were always that way – it was a bro company started by some dudes out of a house in the early 90s, it was always going to be a part of the culture that grew along with the entity as a whole without focused effort to remove it or make it different.

So Microsoft is buying the parent company, and Kotick is expected to be out – these are good developments, especially the latter, but they alone do not fix or atone. Until effort is made to genuinely make-right with affected employees and to cut the rot at its core, it’s just a new entity taking on a rotting husk. Change is coming from within at the lower-level employees behest and effort, but that process has been stutter-stepped by leadership as would be expected, and so a lot of problems likely still remain, and the glimpses we do get to the internal workings are often not great (my blog Twitter has shown me over 10 departures from Blizzard, including a lot of tenured WoW employees, in just the last week and change).

Until we see clear signs that Blizzard the entity is changing in meaningful ways, there’s not a reason to suspect that a change in ownership will have any drastic impact on that. Given that the new parent company has a history of harassment and predatory employment all on its own, and…yeah.

This has been downers to this point, I know, so let’s discuss the positives that could result.

Blizzard on Game Pass

One of the things specifically called out by Microsoft in their press release is that they hope to get ABK titles up and running on Game Pass via this deal, and that could be compelling for a lot of reasons. On the Blizzard side and specifically the WoW side, you could have a future state where a single Game Pass subscription gets you WoW, WoW expansions, Overwatch 1 and 2, Starcraft as a full library, Diablo in all its glory, and more. Subscribing to WoW specifically is a hard sell in 2022, with large content draughts between patches, but subscribing to Game Pass and it just happening to include WoW is a tempting offer. WoW’s business model could be drastically different if the game itself does not have to carry subscriber interest as a singular entity, but can instead be bundled in so that you can dip a toe in with WoW at any point in time. Will it happen? Well, given that Microsoft called out Game Pass, I have to reason that it will be a goal long-term, although the specifics of how it would work are anyone’s guess. Would expansions be bundled? Maybe – it would be appealing, but current Game Pass games with DLC require separate purchases for the DLC, albeit at a discount for subscribers, so I could see something like that remaining the norm for Game Pass and applying to expansions for WoW in this hypothetical future.

WoW On Xbox?

Could happen! If anything, the ownership change means it is far more likely, because before, you’d need a deal to sweeten the pot for ABK to consider the move, while now, it has synergy. Will it happen? I’m not as sure. I think that WoW’s accessibility options for Shadowlands including controller support is a nod in that direction, and FFXIV provides a template for how a tab-target MMORPG model can work on controller. A decent number of FFXIV’s players are console-based, and that helps the game reach the heights it is now, because it is just available to more players in ways that they might want to play. WoW on console used to sound vaguely absurd or weird, but with the template of FFXIV and the controller support that is now baked-in to WoW, the major hurdles are overcome. All current Xbox consoles are x86 machines that use stripped-down versions of Windows and DirectX to interface with the hardware, so a port, while not as simple as just snapping a finger, is logistically not a nightmare and it wouldn’t require anywhere near the reconfig that FFXIV’s PS3 version did. I would suspect that the game will move in this direction, and that we’d see at least Hearthstone as well, since Overwatch and Diablo already have console versions. Starcraft would be the odd-game out, but it is not a currently focused title for Blizzard, and I don’t suspect that would change (and RTS gameplay mapped to console is always fucking weird when the game isn’t designed from the start for it).

The Future of Blizzard Content

One thing that I do think Microsoft does well is that the studios under the Microsoft Game Studios umbrella have a fair amount of autonomy, and there seems to be less focus on making things to meet investor goals or specific profit targets. Outside of the obvious harassment and moral failings, one of the easiest critiques to make of Bobby Kotick is that he publicly stated he didn’t want to make game development fun – his goal was to have studio sweatshops cranking out annual releases to juice investor numbers and share prices, and as long as there was a fraction of an audience for them, all was well. Phil Spencer and the MGS (uh, I guess that is why they don’t use that acronym…)team tend to be more hands-off in that way, and the studios under them produce a pretty broad array of content, including interesting indie-style concepts, AAA blockbusters, and everything in-between.

Theoretically, this could translate into games like WoW being made more lovingly. Not to state that the WoW team doesn’t love their game, but we can see quite clearly, denied or not, how much the profit motive taints the work at the core of the game. Much of WoW is built on temporary systems and content, with only the current patch being the useful or viable content and it being discarded when the next thing comes out. The hope here is that without a corporate taskmaster who openly has distaste for “fun” breathing down their necks, the game teams could focus on making games where the core content and gameplay is engaging in its own right. For me, it creates an interesting point of contrast – I’ve said that a part of what has pushed me out of WoW is that I do think the development teams believe in the concepts they put forward, external pressure leading to them or not, and that demonstrates a lack of artistic instinct and lack of ability to pivot to make things better for players. If my feeling is correct, then the ownership change might well not result in big shifts in how WoW in particular is designed or developed. If I am wrong (a very real possibility), then there is a potential benefit to WoW in this, and that is exciting to me (and worth at least some small amount of hope, IMO).

So on the one hand, ownership changing doesn’t inherently make the game content to come better magically, because the core teams are still making their content as they have been, and the only relief to consider is if they’ll have fewer business metrics to hit for the bean counters. This change also won’t be effective for quite some time – the acquisition is planned to close in the summer of 2023, which means that only content entering design and development after that point is likely to benefit from such a hypothetical. For WoW, that likely means 10.0 is going to be whatever it will be under the current state of things, but 11.0 could, potentially, be grounded in an improved work environment and ownership structure that helps things along.

There is a very real possibility that the lack of strict guidance on business metric targets, or at least a relaxing of them, could benefit WoW majorly, if our assumptions that Activision targets and guidance have led the game astray. While I am openly skeptical of the idea that all that ails WoW comes from Activision, there is certainly an influence from them which is a factor, and lessening that over time could absolutely be a net positive.

The Wild Card – A Better ABK and The Push for Unionization

ABK employees are currently working towards an employee union, a push that has been resisted by famed Trump-administration shithead (redundant) Brian Bulatao, who has sent vaguely threatening emails about how working with the union is not in employees’ best interests. Activision leadership is pretty clear on where they land, but Microsoft would change the contours of that negotiation a bit.

Firstly, it must be said that like most, if not all corporations, especially in the United States, Microsoft is anti-union. Legally, they have to keep a bit of distance from being staunchly so, but the company has a history of anti-labor action, including dismissing several temporary workers who unionized under the Temporary Workers Association.

In all likelihood, this remains an uphill battle for the employees pushing for better, as Microsoft is not much better on this front. What is interesting is the short-term, as the terms of acquisition likely include some business targets for ABK to maintain in order to keep the terms of the deal in place at the current value, and a union forming successfully in the midst of that could very well upend the whole deal. It’s unlikely that the employees succeeding would halt the deal, mind you – but without knowing the key performance indicators that ABK has to meet or exceed to keep things on track, it is a field ripe for some speculation.

The goal for employees does not change and they still can use your support, so I’ve included their thread about today’s news here and a link to their strike fund here.

In Closing

This news was a tad bit unexpected and leaves me with a lot of mixed feelings. There is a sort of dread in that the names change but the underlying issues remain, that the ailments that plague ABK and Blizzard aren’t inherently fixed through this deal, and that the future isn’t quite as shiny as we might like. On the other hand, this is news with the potential to change things for the better, and some changes, like Kotick’s exodus once the deal is done, seem like gleaming lights of hope for positive change. Microsoft is not necessarily better on these fronts, but it is different, and new eyes from new leadership will still cause change, although how much so and how much is positive remains to be seen.

I will say that I have a small seed of optimism I would not have had even yesterday for the future of the games I enjoy, and that perhaps WoW could be on a route to an enjoyable future in this new journey. Activision’s corporate culture always sounded like absolute garbage, and that changing, including the way in which games are approached in development and goals, almost certainly will be an improvement of sorts. In a very real way, it puts the community beliefs to test – if Activision leadership was the main decaying factor, we’ll know that in the coming years, and if it wasn’t, that will likewise make itself known.

My hopes are that the employees find justice for the wrongs committed towards them, that the creative environment under MS is more fulfilling and open, and that things improve for them, as that also means the games we get from them are better. Happy people make good things, generally! While the news that Kotick will likely be gone once the acquisition is complete is good, it is hard to take solace in it knowing what he has done and will be getting away with, effectively – a legacy of awful deeds and a nearly $300 million dollar parachute to do whatever he pleases for the rest of his life. There is too much unearned kindness in him getting paid to fuck off forever with no real consequences for his actions, but in a way, that is a consequence of our modern system, and while I think that sucks really badly, it’s going to take mass action on a scale larger than MMOs, games, and analysis to change that in any meaningful way. It is a small measure of peace to know that he is riding off to the sunset, to know that at least the output of the studios under the ABK umbrella will soon be free of his taint.

Either way, absent the attempts at high-minded analysis and palace intrigue, it is just a fascinating move that I don’t think many expected.

4 thoughts on “Microsoft Buying Activision-Blizzard And What The Future (Could) Hold

  1. Yep, that was a shocker news 🙂

    It’s almost a year and a half though before that (if the deal even happens), and even more time before any changes take place under new management, so I’m pretty calm about the news at present. By summer 2023, a new expansion should be delivered, so this is what gonna define the future of WoW for the next 3 years.

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  2. I doubt Wow will be put on Game Pass as ESO Plus isn’t on Game Pass. MMO players have shown they’ll pay an extra subscription, so why not continue milking that. For the next few years, at least. Still, MS could go “All Access” and add both MMOs which would be a compelling proposition. That said, I don’t expect we’ll see any major changes until 2024 or later. Definitely game development lead-times means we won’t start to see the affects of MS leadership until sometime after 2025 or so.

    Given how MS has helped Minecraft flourish, I’m not so worried about Activision-Blizzard games being screwed over. Yes, in other areas MS has been bad, but the Gaming Studio seems to have the right touch for things. After all, 120+ million monthly Minecraft players makes Wow look like the game of a small, indie studio. ^_^

    The fallout for other independent developers will be something to watch over the next few years. EA and Ubisoft both have smaller Market Caps than Activision-Blizzard, so both of them start to look appealing as defensive acquisitions since new Activision-Blizzard games are likely to be Xbox / PC exclusives…

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    1. The ESO tidbit is great context, thanks for that. To Microsoft GS whose major focus is their console, it feels like a Call of Duty acquisition and a mobile acquisition for King stuff, with the Blizzard portfolio being almost secondary, but yet the majority of the games shown in the graphic from MS were Blizzard, so…it’s hard to get a good read on where things are going on all fronts!

      I do like an MMO all-access pass idea. I think a big part of the scourge of modern WoW is being built for acquisition and failing at it because the content is trite and repetitive – would be great to see that concern lifted if only to see what came out of it. I have another post in planning stages on the Game Pass stuff, so all of this is interesting context to flesh my thinking on that out – it’s probably the part of it I’m most interested in with Kotick out and aside from WoW on Xbox (I don’t own an Xbox anymore but the idea of it is interesting!).

      I think there’s a lot to celebrate with the MS acquisition, although I worry that on the employee treatment front, the unchecked celebration I’ve seen from some is not quite fitting. Their acquisitions to date have been interesting and much larger, so I don’t worry as much about them doing worse than Activision’s old guard (a lower bar could never be set).

      As for EA and Ubisoft, that is an interesting tidbit I would not have expected, and I am very curious for that as well. Sony has to be feeling a bit of pressure, because right now both systems sell-through everything, but as chip shortages begin to relent (it’ll happen any day, right? RIGHT?!) there will be a meaningful choice in the market and at that point, MS has a ton of exclusives lined up that will pull the rug out from under the PS5. Getting EA would mean the strongest loyalty sports lineup, but then EA is also chummy with MS and EA’s subscription program rolls into Game Pass now, so that is an interesting situation. Ubisoft is also interesting because they have a lot of major third-party titles on their roster and they’re similarly mired in sexual harassment issues, which might open them to an acquisition down the road.

      Interesting times!

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