Microsoft’s Activision deal shows big tech’s dominance over legacy media

Microsoft’s decision to buy video game company Activision Blizzard for $68.7 billion shows that big tech companies continue to push the envelope while traditional media companies, desperate to reposition themselves for younger audiences, stay on the sidelines.

The biggest tech companies, including Apple, Amazon and Alphabet, have come under intense scrutiny from US regulators and lawmakers for having too much market power in today’s economy. It’s possible the government will decide that Microsoft shouldn’t be allowed to buy Activision.

But, if the deal is approved, it’s hard not to see it as another missed opportunity for older media companies to transform. As Meta, Roblox, and other tech companies position themselves around a metaverse-dominated world filled with new gaming opportunities, traditional media companies have focused on subscription-based streaming video — perhaps a form more limited entertainment.

“Gaming is the fastest growing and most exciting entertainment category on any platform today and will play a key role in the development of metaverse platforms,” ​​Microsoft CEO Satya Nadella said in a statement. “When we think about our vision of what a metaverse can be, we believe that there will not be a single, centralized metaverse. That shouldn’t be the case. We have to support many platforms of metaverse and a robust content and application commerce ecosystem.”

The game would allow Disney and Comcast to remain relevant to younger audiences even if legacy assets disappear, said Brandon Ross, media and technology analyst at LightShed who has focused on the gaming industry. nearly $70 billion would be a huge deal even for the biggest media companies, such as Disney or Comcast, with market valuations between $200 billion and $300 billion. It’s not as big for Microsoft, which has a market capitalization of $2.3 trillion.

But it wasn’t always like that. Microsoft will acquire Activision for $95 per share. Activision shares were trading as low as $42 about two years ago, in February 2019. Go back in time, to 2012 or 2013, and Activision shares cost around $10 each.

The idea of ​​a major media outlet buying a major video game company has been circulating for many years. Here’s a CNBC story from 2012 speculating on Time Warner, which sold to AT&T in 2018, buying Vivendi’s 60% stake in Activision for around $8 billion.

Of course, that never happened.

The mainstream media “was too self-absorbed to see how the world was changing,” Ross said. “The video game industry has gotten bigger and legacy media has gotten smaller.”

Netflix, the quintessential tech company that ate the lunch of legacy media, said last year it would experiment with offering video games with its subscription video service. WarnerMedia, formerly called Time Warner, has a small video game division called Warner Bros. Interactive Entertainment, but AT&T considered selling it before deciding to merge all of WarnerMedia with Discovery.

Comcast and Disney have largely stayed away, perhaps because video games aren’t part of either company’s core competencies. Disney shut down its game development business in 2016.

“This business is a growing business, and we didn’t have enough confidence in the business in terms of sufficient stability to stay there from a self-publishing standpoint,” said then-president Bob Iger. CEO of Disney at the time. of the decision.

Microsoft, which owns Xbox, has focused on the gaming world for more than two decades.

Maybe Activision won’t move the needle much for Microsoft. It’s possible that games, in general, are distracting Microsoft from its core competency: serving the business community with software. Creating video games is an achievement-driven business, and games like “Call of Duty,” “Warcraft,” and “Overwatch” may lose popularity as virtual reality or other technologies increase. Maybe Activision won’t be able to keep up with the new favorites.

Or, maybe Activision’s deal will inspire a legacy media company to finally play for another big game company like Take-Two Interactive — which just announced a deal to buy Zynga — or Electronic Arts.

But Microsoft can afford to take a swing, while legacy media have positioned themselves to keep their collective bat on their shoulder and hope the pitch is a ball.

Disclosure: Comcast is the parent company of NBCUniversal, owner of CNBC

WATCH: Microsoft and Activision set up a “collision course” with DC lawmakers.

About Deborah Wilson

Check Also

Gravity Media Capture History at Pho3nix SUB7 SUB8 Triathlon

Gravity Media has teamed up with Mana Sports and Entertainment Group to capture the story, …