Microsoft Bets Big on the Metaverse with $68.7B Deal For Activision Blizzard

Microsoft is set to acquire gaming publisher Activision Blizzard in a $68.7 billion all-cash deal meant to further the trillion-dollar company’s metaverse ambitions, experts say.

David Nage, a portfolio manager for digital-assets investment firm Arca, told Blockworks that Microsoft’s plans for the metaverse have been growing. 

“Over the course of the last few quarters [Microsoft] has been aggressively building out into the metaverse,” Nage said. “A very large part of their business line is Xbox gaming and so immediately I thought that this had some sort of semblance or focus on the metaverse.”

Microsoft called the acquisition a way “to accelerate the growth in Microsoft’s gaming business” and to “provide building blocks for the metaverse” in a statement announcing the deal on Tuesday. 

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft Chief Executive Officer Satya Nadella said.

Microsoft, which makes Xbox consoles and produces Minecraft, will acquire Activision for $95 per share, around a 45 percent premium. 

With the purchase, Microsoft will gain hit gaming franchises such as Call of Duty and Candy Crush. When the transaction closes, Microsoft is set to become the third-largest gaming company by revenue. 

Microsoft made headlines when Nadella first mentioned the term “metaverse” at its annual conference in November 2021. Nadella said the software giant will roll out almost 100 new services and updates in three areas — including the metaverse. Additionally, Microsoft is set to release its own virtual reality goggles and gloves later this year. 

“As the digital and physical worlds come together, we are creating an entirely new platform layer which is the metaverse,” Nadella said. “In a sense, the metaverse enables us to embed computing into the real world and to embed the real world into computing bringing real presence to any digital space.”

The acquisition comes as Activision has faced several allegations of sexual harrasments and gender inequities that resulted in a lawsuit from California regulators in July 2021 for promoting a culture of “constant sexual harrasment,” according to The Verge.  

Activision CEO Bobby Kotick is expected to exit the company after the deal closes, the Wall Street Journal reported, citing people familiar with the matter. 

Nage predicts that Microsoft may tap Activision properties to experiment with non-fungible tokens in the company’s video games and will eventually “build a robust metaverse.”

“I think this is just the start of Microsoft’s adventure into play-to-earn gaming,” Nage said. “Microsoft will start to look beyond Activision Blizzard and into some of the [blockchain-based] games that are starting to evolve today … I think they will start to incorporate some of [those] into their own metaverse.” 

Microsoft (MSFI) shares traded 2.43% lower to $302.65 at the close. Activision Blizzard Inc. (ATVI) soared 25.8% to $82.31.