WEDNESDAY, JANUARY 19 , 2022. THE WASHINGTON POST EZ RE A
company will stay autonomous
from Microsoft.
Despite being one of the most
valuable companies in the world,
with a valuation of more than
$2 trillion, Microsoft to date has
largely sidestepped the recent
flurry of antitrust scrutiny aimed
at Facebook, Google, Apple and
Amazon. (Amazon founder Jeff
Bezos owns The Post.)
Microsoft pointed out in its
blog post announcing the deal
that buying Activision Blizzard
would make it the third largest
gaming company by revenue, still
beat by Tencent and Sony.
That may not be enough to
keep regulators at bay. The deal
would be one of the largest in the
history of the tech industry, edg-
ing out Dell’s acquisition of EMC
in 2016.
Herb Hovenkamp, an antitrust
professor at the University of
Pennsylvania Law School, said
the Microsoft deal is likely to
invite antitrust challenges, given
its size.
“The agencies might be apply-
ing closer scrutiny given that they
have been attacked for being
somewhat under deterrent with
respect to mergers over the lastWhen the deal is finalized, that
company will report to Microsoft
Gaming CEO Phil Spencer.
The deal price would surpass
Microsoft’s 2016 acquisition of
professional networking site
LinkedIn, which the business
software company bought for
$26.2 billion. Microsoft made a
name for itself as a PC and busi-
ness software maker, and is now
one of the largest providers of
cloud-computing services in the
world with its A zure d ivision. But
the company has its arms in a
sprawling list of businesses, in-
cluding gaming, health care and
artificial intelligence.
Microsoft CEO Satya Nadella
has for years acted to preserve the
company’s gaming unit, even
when some analysts had suggest-
ed the Xbox business wasn’t
worth keeping.
In an email sent to Activision
Blizzard employees Tuesday and
shared with The Washington
Post, Kotick wrote he would stay
on as CEO “with the same p assion
and enthusiasm” he had when he
started the job in 1991. He wrote
that the deal will close sometime
by June 2023, pending regulatory
approval, and until then, thewas announced, even as the
smaller company grapples with
multiple lawsuits and claims of a
toxic work environment. Activi-
sion Blizzard has established it-
self as a leader with several popu-
lar game franchises, but Micro-
soft would be taking on a trou-
bled asset.
In July, the publisher was sued
by California’s Department of
Fair Employment and Housing
(DFEH) in a suit that alleges
widespread gender-based dis-
crimination and sexual harass-
ment at the company.
Activision Blizzard also faces a
U. S. Securities and Exchange
Commission investigation, as
well as a class-action lawsuit in-
stigated by shareholders, and an
unfair labor practices complaint
filed by workers and the media
labor union Communications
Workers of America. The publish-
er’s C EO, Bobby Kotick, has faced
repeated calls by employees to
step down.
Microsoft announced that
Kotick will stay on as CEO of
Activision Blizzard, but he is ex-
pected to step down when the
deal closes, according to media
reports.end of 2021.
The allegations in the DFEH
lawsuit, and what some workers
saw as a lacking response from
the company, prompted a series
of walkouts by employees. In
November, more than 1,000 Ac-
tivision Blizzard employees
signed a petition calling for
Kotick to resign as CEO, a call
that was echoed by shareholders.
Nadella briefly addressed the
concerns during a call with inves-
tors Tuesday.
“We believe it’s critical for the
Activision Blizzard to drive for-
ward on its renewed cultural
commitments,” he said. “We are
supportive of the goal and the
work Activision B lizzard i s doing,
and we also recognize that after
close, we will have significant
work to do in order to continue to
build a culture where everyone
can do their best work.”
Industry analysts believe the
controversies around Activision
Blizzard may have pushed down
the acquisition price.
“[Microsoft is] paying a lot less
than it would have a year ago,”
said Joost van Dreunen, a lectur-
er on the business of games at t he
New York University Stern
School of Business.
Gender discrimination and
sexual harassment allegations
have roiled the entire tech indus-
try in recent years, including
Microsoft. Microsoft announced
last week that it has hired an
outside firm to conduct a review
of the company’s sexual harass-
ment and gender discrimination
policies after a shareholder pro-
posal pushing for the investiga-
tion was approved.
In the Tuesday blog post an-
nouncing the acquisition, Spen-
cer also shared that Game Pass,
Microsoft’s video game subscrip-
tion service, had surpassed the
mark of 25 million subscribers. I n
a news release, Microsoft explic-
itly connected the acquisition to
its Game Pass subscription offer-
ing, noting that the purchase will
set in motion plans to release
Activision Blizzard games on the
service.
[email protected]
[email protected]
[email protected]
[email protected]Te ddy Amenabar contributed to this
report.decade,” Hovenkamp said in an
interview.
The acquisition comes at a
time when the video game indus-
try has made major strides both
financially and culturally. In
2020, with people around the
world self-isolating and turning
to games amid the coronavirus
pandemic, the gaming industry
recorded double and even triple
digit jumps in engagement in
terms of sales and time spent
online. S&P Global Market Intel-
ligence p redicted in November o f
last year that video game content
revenue would surge past
$200 billion in 2022 following
marked year-over-year leaps be-
tween 2019 and 2021.
Microsoft’s acquisition of Ac-
tivision Blizzard is more than
four times bigger than the previ-
ous record sum paid for a video
game publisher set earlier in Jan-
uary when Take-Two Interactive
announced plans to purchase
mobile game maker Zynga for an
estimated $12.7 billion.
In 2 020, Microsoft paid
$8.1 billion to acquire ZeniMax
Media, the parent company of
popular video game developer
Bethesda Softworks.
The acquisition could also po-
sition Microsoft to better com-
pete in the nascent business of
the “metaverse,” or online worlds
that have become a recent focus
of tech companies. Facebook re-
cently changed its corporate
name to Meta, in part to reflect its
emphasis on building out the
metaverse.
Buoyed by the releases of ma-
jor new games like “Call of Duty:
Warzone” and a mobile v ersion of
Call of Duty, Activision Blizzard’s
stock soared over the past two
years, peaking at over $100 per
share in February 2021. But the
company’s fortunes swung in
July with the filing of the lawsuit
from California’s DFEH. That
lawsuit alleged gender-based dis-
crimination and harassment, pri-
marily at Blizzard Entertain-
ment, one of the company’s major
studios and the developer of
World of Warcraft.
Blizzard President J. Allen
Brack stepped d own as a result of
the lawsuit, replaced by a tandem
of Mike Ybarra and Jen Oneal.
Oneal stepped down from the
position after just three months
and left A ctivision Blizzard at t heheavy-hitting game business,
which includes gaming unit Xbox
and popular kid’s game Mine-
craft, and position Microsoft well
to compete in the emerging
“metaverse” business prioritized
by tech companies. Microsoft has
built itself into a tech conglomer-
ate in recent years through big
deals such as career networking
site LinkedIn and coding site
GitHub, as well as its homegrown
cloud-computing powerhouse
Azure — part of a growing trend
among tech giants toward oper-
ating sprawling empires.
The Activision tech deal is the
largest one in recent memory,
several times the size of Amazon’s
and Facebook’s largest acquisi-
tions of Whole Foods Market and
WhatsApp, respectively. But this
deal sets up a major test for U. S.
regulators, who are increasingly
skeptical of consolidation in the
tech industry.
The companies don’t expect
the deal to close until 2 023.
Microsoft has largely escaped t he
trustbusting scrutiny that its fel-
low tech giants have endured
recently, in part by carefully ap-
plying lessons it learned in its
huge antitrust battle with regula-
tors two decades ago.
The Activision acquisition
dwarfs others that have faced
opposition from the Federal
Tr ade Commission and Justice
Department, including the
$40 billion semiconductor deal
the FTC sued to block in Decem-
ber.
Antitrust enforcers from the
Justice Department and FTC
hosted a news conference Tues-
day on strengthening enforce-
ment of mergers, asking the pub-
lic to weigh in on how they can
ensure competition guidelines
can address digital markets.
“All of the signs, all of the
indications point toward more
demanding scrutiny,” said Wil-
liam Kovacic, a professor at
George Washington University
Law School and former FTC
chair.
Staffers from the Justice De-
partment and FTC declined to
comment on the deal during
Tuesday’s news conference.
The purchase price is a signifi-
cant premium on Activision Bliz-
zard’s stock price before the deal
MICROSOFT FROM A
Microsoft to buy video game giant, setting itself up as a one-stop tech shop
MIKE BLAKE/REUTERS
Activision Blizzard was sued by California’s Department of Fair Employment and Housing in July.
The s uit alleged gender-based discrimination and harassment — primarily at Blizzard Entertainment,
one of the company’s major studios, which is headquartered in Irvine, Calif.LeadershipDuring CrisisNew Hampshire Gov. Chris SununuWednesday, January 19 at 11:00 a.m.Sununu discusses his COVID-19 response,his decision not to run for the U.S. Senatein 2022 and his efforts to seek a fourthterm as New Hampshire governor.To register to watch, visit:wapo.st/sununujanor scan code with asmartphone camera:Listen wherever podcast s are ava ilable.@POSTLIVE #POSTLIVE