Microsoft’s planned $68.7 billion purchase of video game giant Activision Blizzard is, literally, one of the biggest deals ever. By raw dollars and cents, it appears to be the biggest acquisition an American tech behemoth has ever made. It dwarfs not just any deal Microsoft has done, but also anything struck up by Apple, Amazon, Google, or Facebook. It makes Microsoft’s $26.2 billion LinkedIn shopping spree in 2016 look small. And it’s notable not just for its size but for its timing: The deal comes in the midst of months of uproar at Activision Blizzard over its treatment of workers, many of whom have alleged a toxic, sexual harassment–filled culture at the game publisher.
The companies expect the deal to close some time in the 2023 fiscal year, but it’ll take longer than that to sort through all its ramifications. Whether it works out for Microsoft is impossible to know, and the same is true for people who work at both companies or buy their products. At this early stage, though, there is one exceptionally clear winner, and no one has any reason to cheer for him.
The biggest victor of the arrangement is Bobby Kotick, the chief executive of Activision Blizzard. Kotick was responsible for the company that, in 2021, prompted 2,000 workers past and present to sign a letter excoriating the management of the firm and its treatment of its people. “We no longer trust that our leaders will place employee safety above their own interests,” those employees wrote. The California Department of Fair Employment and Housing sued Activision Blizzard last year, not just alleging heinous treatment of employees but also the shredding of documents to hinder an investigation. One of California’s charges is that the company was a “breeding ground for harassment and discrimination against women,” where men openly joked about rape.
A lot of people wanted Kotick fired, for fair reasons. Activision Blizzard didn’t do that, though it did cut his salary to $62,500 while awarding him about $150 million in stock. That stock is a lot more valuable today than it was yesterday, because Kotick and Activision Blizzard got Microsoft to pay $95 per share in the acquisition. The stock closed in public markets last week at $65.39, meaning the Microsoft deal, assuming it closes, will get shareholders a 45 percent premium. Kotick, as one of the company’s biggest shareholders, will make out better than just about anybody. He will also stay on and continue running Activision Blizzard within Microsoft, the companies announced, so it’s not quite right to say he is getting a golden parachute out of this deal. It’s more of a golden launching pad, which could (and probably will) also involve Microsoft stock as he takes Activision to its new mothership. That’s a place, by the way, where the head of Xbox (and Kotick’s apparent new boss) once said he was “disturbed and deeply troubled by the horrific events and actions” at Activision Blizzard. Maybe the market share is worth it.
Other ATVI shareholders are winners, too, though in a more complicated sense. A 45 percent premium looks great, but on the other hand, the company’s stock was regularly trading around $95 for much of 2021, getting as high as $104.53 at one point. Microsoft is paying a rate near the high end of where Activision Blizzard stock has ever traded, but the only reason it’s a huge boost is that the stock tanked in the late summer and fall as embarrassing stories about the company made the news all over the world.
That prompted an activist investor group to try unsuccessfully to rein in Kotick’s pay package and unseat the board member who directs compensation discussions. The investors’ argument was that Activision Blizzard’s shareholders would be best served by durable reforms to the company’s culture and leadership. Were they right? Through one lens, the Microsoft deal proves them wrong, because shareholders are making out great in light of where the stock was trading last week. (Even before the deal closes, ATVI shares were up around 30 percent on Tuesday morning, racing toward the eventual $95 per share that Microsoft has agreed to pay.) But through another lens, Activision Blizzard shareholders might’ve been better off if the company simply never faced widespread and credible claims of worker mistreatment and continued to grow on its own terms. It’s not like the gaming industry isn’t booming. As Microsoft put it in announcing the deal, the $200 billion-plus industry is “the largest and fastest-growing form of entertainment.” The reasons Microsoft paid this much could have just as easily been reasons for Activision Blizzard to be a rocket ship on its own, had its leadership done a better job all along.
And what of the workers who just wanted the company to be better, not for the sake of shareholders but because treating people poorly is a bad thing to do? It’s impossible to know how a Kotick-led Activision Blizzard under the Microsoft umbrella will be different from the current iteration of the company. Being a huge, publicly traded firm as a standalone didn’t prevent Activision Blizzard from behaving like it did the first time around. Maybe that’ll change as part of one of the most valuable public companies on the planet. Maybe it won’t. And maybe Kotick will leave not long after the deal closes, but there is no current indication of that.
The deal’s impact on the rest of us, as people who play video games, is also uncertain and probably mixed. Along with at least 25 million other people, I have agreed to pay Microsoft between $9.99 and $14.99 per month for a subscription to Xbox or PC Game Pass, which affords me access to hundreds of games, most of which I don’t actually play because I lack both the time and the storage space on my Xbox Series S console. Activision Blizzard produces a handful of the most popular games in the world, including the World of Warcraft and Call of Duty franchises and Candy Crush. Many of its games are likely coming to Microsoft’s subscription offerings, which would make the services more valuable to a ton of gamers even with a modest price hike. It would be great to never have to pay for Call of Duty again, so I could fire virtual grenades at 14-year-olds on the internet and easily move to another game once I get tired of being killed.
On another hand, the top of the gaming industry has been consolidating for a long time. Microsoft already owned 23 gaming studios after closing a deal for another big studio collective, Bethesda Softworks, in 2021. Activision Blizzard was the product of a merger itself. It is similarly not hard to envision a further lack of competition resulting in less varied and less interesting games for players, echoing what Martin Scorcese and many others have criticized about a superhero franchise-dominated cinematic landscape. It is also possible that regulators will complicate the deal; Microsoft is not a giant in social media and doesn’t make a lot of news for trying to crush unions in warehouses, so it gets less public scrutiny than some of its peers. But it is a hugely powerful company on its own terms, and that might raise governmental eyebrows.
Like almost everything about this deal, it will take time to see where the chips fall. In some way or another, lots of people will feel long-run consequences from the marriage between Microsoft and Activision Blizzard. No matter what they are, Bobby Kotick will be even more wildly rich.