Microsoft is set to strike a deal to buy “Call of Duty” video game maker Activision Blizzard in a deal that would value the company at around $70 billion, according to media reports. The transaction is an all-cash transaction for $95 per share.
Video games are a multi-billion dollar business. In 2020, global PC gaming market revenue was estimated at nearly $37 billion in the United States, and the mobile gaming market generated an estimated revenue of over $77 billion, according to Statista. Activision owns two of the most popular and lucrative games, Call of Duty and Candy Crush.
Microsoft is already among the top five video game makers by revenue with Sony, Tencent and Nintendo in the top spots. This deal could position the company near the top, just behind Sony. Microsoft is probably the Big Tech company, along with Apple, Amazon, Facebook and Google, that invests the most in this industry. But other companies are not completely leaving this industry. Amazon bought Twitch in 2014, a video game streaming service where people can watch others play. Apple and Google generate billions of dollars each year in App Store fees from consumers who pay for games and in-app purchases. Meta (formerly Facebook) is investing in augmented reality with its Oculus division, producing virtual reality headsets. Even Netflix is trying to leverage its customer reach to launch new on-demand video games.
Microsoft-Activision’s regulatory assessment may provide new analysis on which markets are relevant, how these markets are related, and whether other Big Tech companies should be included in the analysis. Companies are expected to file the agreement in multiple countries and an antitrust investigation may be conducted in parallel. Past experience with similar agreements suggests that EU and US authorities will collaborate during the analysis.
At this point, it’s unclear if the companies will face significant antitrust issues, but the review can be complex as regulators may need to test market definitions. Regulators may not only need to investigate the differences between PC games, console games, and mobile games, but they may also consider whether future VR developments should be included and, if so, how. they can be defined. Although the metaverse may be too far from a reality to be included in the analysis, it cannot be entirely ignored.
Microsoft CEO Satya Nadella has previously expressed interest in the Metaverse, “when we think about our vision of what a Metaverse can be, we think it’s not going to be a single, centralized Metaverse” , Nadella said.
In addition to the limitations of video game market definitions, regulators may also need to consider the different ecosystems of big tech companies and their interactions. Big Tech companies don’t operate in silos and the insights they gain from the various acquisitions can give them new opportunities to expand into adjacent or new businesses. In this regard, regulators can ask companies to ensure that consumer data will not be used for advertising purposes or in other parts of the business.