Microsoft acquired Activision Blizzard at $69 billion. This is the largest deal in the tech world. Why did Microsoft acquire Activision?
Gaming market scenario
The gaming market in which Microsoft competes is the gaming consoles.
Here it has a tough fight with Sony. Microsoft’s Xbox competes with Sony’s Playstation. But if we see the gaming consoles market landscape for the United States, Sony is a clear winner. Sony beats Microsoft with a huge edge with its market share going to a peak of 87% in 2022 as opposed to 12% of Microsoft. The lifetime sales of PlayStation’s latest PS5 which was released in 2020 is 32 million units. It is around 20 million units for the Xbox Series X and S. In the lifetime sales, this number is more intensely seen. In the EU, it is 80% Sony and 20% Microsoft. Globally, Sony has a 70% market share as opposed to the 30% of Microsoft.
Gaming console market share | Sony | Microsoft |
US | 87% | 12% |
EU | 80% | 20% |
Global | 70% | 30% |
With the addition of Activision, Microsoft aims to widen its gaming offerings. Activision is the owner of popular games like Call of Duty and Candy Crush Saga. Microsoft would make avail these hit games on Xbox.
The Future of Gaming: Cloud
One of the reasons for PlayStation being a market leader is Sony’s expertise in hardware. On the other hand, software is the forte for Microsoft. Operating systems and productivity software being the flagship Microsoft products, it has unparalleled expertise and talent in building software.
This is exactly where Microsft is betting on and by far has succeeded. Like the trend for many, gaming experiences are now being introduced on the cloud.
Microsoft has pioneered this domain of cloud gaming. This is like Netflix for gaming, where the subscribers have to pay a monthly subscription to play. And the best part is, it can be hardware agnostic. It can be played on gaming consoles, computers, or on smartphones. Cloud gaming is a very flexible option for customers as well, with huge prices not paid at first.
If we look at how Microsoft has progressed in cloud gaming, it had around 20-30% market share in 2021. But by the end of 2022, this market share rose to 60-70%. Large companies like Google shut down their gaming services after this.
Cloud gaming market share | Microsoft | Sony | Nvidia | |
2021 | 20-30% | 30-40% | 20-30% | 5-10% |
2022 | 60-70% | 10-20% | 10-20% | 0-5% |
Conclusion
Clearly, with the acquisition of Activision, Microsoft aims to diversify its gaming portfolio in terms of the varieties of games on Xbox and, especially, on cloud gaming. This acquisition also opens up a new horizon of mobile gaming which it was not on before.
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