Microsoft is acquiring a company for $68.7 billion. Should the purchase go through, it will change the gaming industry and potentially catapult Microsoft's Xbox gaming division and Game Pass subscription service.
Microsoft will own a star-laden roster of some of the most popular and critically successful game franchises of the PC/console era, including Call of Duty, Overwatch, StarCraft, and Candy Crush. Microsoft said in its announcement of the deal that bringing those titles on board would give it access to hundreds of millions of people and a position of third-largest gaming company by revenue behind Sony and Tencent.
It is more complicated than a handshake and a wire transfer. There are allegations of sexual harassment and discrimination that have been made against the company and it is in the midst of a crisis. The current CEO of the publisher is being asked to resign by some players. Some of the most successful games in the company are in limbo, and many feel that the publisher has lost its way in recent years.
Microsoft expects the deal to be done in the fiscal year of 2023, so it could take up to 18 months for the transition to occur. There are some hurdles that Microsoft has to overcome and a reward for saving a sinking ship.
Satisfying regulators.
We need to warn people that this acquisition might not pass the inspection of regulators. It will be interesting to see how Microsoft defends the purchase against anti-competitive complaints.
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The Federal Trade Commission is on high alert because of attempts to prevent big tech from becoming even larger. The agency believes that if Arm is acquired by Nvidia, it would make it harder for other companies to compete.
Microsoft spent $7.5 billion on ZeniMax Media, the parent company of Bethesda, after buying several once-independent studios. The European Commission approved the deal without conditions.
Microsoft thinks it is in a good place to move the deal forward after it announced the acquisition publicly. Microsoft may be able to point out that it is larger than its competitors after the purchase. The purchase is not near a done deal, but calling out these rivals could help massage this through the regulatory process.
The house is being cleaned.
That is perhaps the least of Microsoft's problems. Phil Spencer, the boss of the Xbox, was disturbed by the events and actions of the company. He went on to say that Xbox was making adjustments to their relationship with the company.
We don't know what those adjustments might have been, but apparently, the evaluation concluded with Microsoft purchasing the video game publisher, which Spencer is now signed on to lead.
His condemnation came after the Wall Street Journal reported that Bobby Kotick, the CEO of the company, had a history of horrifying behavior.
The question on many minds is what will happen to Kotick. The Journal reported that nearly a fifth of the employees at the company asked Kotick to resign. Kotick is safe in the short term. He will continue to serve as CEO of the company. Kotick will lose his post once the company is folded into Microsoft's gaming division, which will be run by Spencer.
The removal of Kotick is the first step in a comprehensive transformation of the publisher's workplace culture. The work toward that goal has begun, with more than 50 employees leaving and 44 being disciplined. The Equal Employment Opportunity Commission reached a settlement with the publisher after the California Department of Fair Employment and Housing sued them for rampant sexual harassment.
Microsoft is doing everything it can to assure us of the changes that are coming to the organization, but it is at risk of losing its reputation if it takes too much of a stance.
The culture of Microsoft is the number one priority for the CEO, according to a statement. It is critical for the company to drive forward on its cultural commitments. We support the goals and work of the company. After the close, we will have a lot of work to do in order to continue to build a culture where everyone can do their best work.
Even if Microsoft clears house, there is no guarantee that the gaming community will respond. I think most people will go back to playing Call of Duty once Microsoft takes over the gaming division and promises a zero-tolerance policy on workplace harassment.
Should the next game in the series ever arrive, it will be easy for people to justify playing it, since the title screen says Xbox instead of being accused of being a breeding ground for harassment.
What about the games?
Microsoft hasn't revealed its plan for the franchises it could soon have under its belt, but it's clear a hands-off "go about your business" approach can't be applied to every title.
The latest entry in the Call of Duty franchise, Call of Duty: Vanguard, was panned by critics and customers alike when it was released last year. In development hell, where, rather ironically, Diablo 4 also finds itself, is the sequel to the smash-hit movie, "Overwatch 2." Microsoft has a lot of resources to put behind these titles, but there is no plan on how to move forward with them. Microsoft may as well hold a bundle of that $70 billion up to a flame because of the delicate place that Overwatch and others are in.
There is a question of exclusiveness. Microsoft didn't spend a lot of money on games that would be available on other platforms. Some of the games set to be under the Microsoft umbrella will be protected from the likes of Sony.
Call of Duty and Overwatch will not be exclusive to the Xbox unless Microsoft figures out how many people will switch platforms or sign up for the Xbox Game Pass, which has 25 million subscribers.
This is all speculation. The future looks bleak, so I warn my fellow PS5 owners: Microsoft's recent acquisition of Bethesda is hard evidence. We already know that Starfield will be an exclusive for the Microsoft platform, and that The Elder Scrolls VI will only be available on PC and Xbox. We can use the transitive property to conclude that many of the current intellectual property from the company will be exclusive to PC and XBOX unless there is something to say about it.
What about the Metaverse?
Microsoft says the acquisition could help build the metaverse. The collective eye-roll.
The metaverse is a theoretical future in which the physical world is augmented by virtual, augmented, and mixed reality. If you have read or watched Ready Player One, you have an idea of what it might look like, though a world that has descended into chaotic chaos isn't part of the plan.
Microsoft CEO Nadella said that gaming is the most exciting category in entertainment and will play a key role in the development of metaverse platforms. We are investing in world-class content, community, and the cloud to bring a new era of gaming that puts players and creators first and makes gaming safe, inclusive, and accessible to all.
The metaverse is a place for billionaires who are bored of Earth to leave it behind and use their money to fix other things.
Microsoft's commitment to the metaverse is discouraging and distracts the millions of people who are more interested in seeing the beloved franchises given new life when a path to recovery seemed unlikely amidst the publisher's crumbling walls. There is no guarantee that the metaverse will be realized, but it is clear that we are many years away from the grand vision tech companies have been pushing for months now. Microsoft has too much on its plate to start thinking about how the internet could be replaced.
The stakes are high.
It is too early to say if this acquisition will be good or bad, but it is hard to imagine a different path for the company. With a parent company like Microsoft, the company can cut its losses and work under new management that will hopefully create an inclusive workplace and get some of the most cherished PC and console franchises back on track.
Microsoft could eventually overtake Sony in the console wars by expanding its video game portfolio, if it purchases the company. Bringing these games to Game Pass will make the subscription service even more compelling, while releasing new games exclusively on Xbox could encourage or even force people to move from Sony's PS5 to Microsoft's platform.
The risks are the same as the rewards. Microsoft will inherit a mess if it can't fix the problems at the game studio, and if it can't, it will blow its own reputation.
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