Activision Blizzard–The world’s biggest tech company announced its biggest purchase ever on Tuesday, agreeing to acquire scandal-plagued video game giant Activision Blizzard in an all-cash deal valued at $68.7 billion. As a result, Microsoft will become the third-largest video game maker in the world and receive rights to some of the world’s most popular games, including Call of Duty and World of Warcraft.
“Together with Activision Blizzard, we have an incredible opportunity to invest and innovate to create the best content, community and cloud for gamers,” said Microsoft CEO Satya Nadella in a conference call with investors on Tuesday.
As part of the deal, which will close in 18 months, both companies expect to grow their respective franchises in the highly competitive and lucrative video game industry. “This is not about short-term results,” Phil Spencer, Microsoft’s head of gaming, said during the call. “We’ve seen Activision Blizzard’s product roadmap and are incredibly enthusiastic about what the teams are creating and the company’s pipeline over many years to come.”
Microsoft hopes to become one of the next major entertainment companies by acquiring Activision Blizzard, despite Activision’s reputation for toxic workplaces. Microsoft’s Xbox brands have steadily expanded their efforts to lead the video game industry, even though the company has long been associated with its Windows and Office productivity software. Activision, it believes, is an important investment in its gaming future.
As part of its efforts to become a Netflix-like company by investing heavily in content that convinces people to pay for subscriptions, Microsoft pitched the acquisition of Activision, along with earlier acquisitions including Fallout and Doom maker Bethesda. “As our platform becomes more attractive, the flywheel of content creators and players accelerates as the creative range on our platform continues to expand,” Spencer said.
Activision plans to use its games in different ways. As a way to expand into mobile gaming, Activision’s puzzler Candy Crush Saga appeals to Microsoft. Meanwhile, it can leverage its $15 per month Game Pass Ultimate subscription service and cloud gaming initiatives to benefit from hit action adventure titles Diablo and Call of Duty and the fantasy shooting series Overwatch.
Despite the opportunity the deal presents to Microsoft, Activision is under intense scrutiny because it has been accused of discriminating against women and fostering a “frat boy” working culture. This summer, the California Department of Fair Employment and Housing filed a lawsuit against the company alleging discrimination and harassment. Earlier this year, the US Equal Employment Opportunity Commission found that Amazon violated the civil rights of employees, including sexual harassment, pregnancy discrimination, and retaliation. The EEOC and Activision Blizzard reached an 18 million dollar settlement quickly. The Activision CEO has been accused both of failing to address and further these issues amid investigations and employee activism, leading to calls for his resignation.
Kotick will report to Spencer, whom Microsoft described as a successful cultural change agent, as the company plans to keep him at Activision Blizzard. “As CEO of Microsoft, the culture of our organization is my No. 1 priority,” said Nadella, referring to efforts he has made to soften Microsoft’s historically competitive culture. “We must continuously improve the lived experience of our employees and create an environment that allows us to constantly drive everyday improvement in our culture. This is hard work. It requires consistency, commitment, and leadership that not only talks the talk but walks the walk.”
After the news surfaced, Microsoft shares fell modestly to $306.80, down 1% from the day’s opening price. The company’s shares already traded at more than 32 times Activision’s purchase price.