Since 2018, Xbox and now CEO of Gaming at Microsoft Phil Spencer, have been opening up the massive Microsoft wallet to address a limited first party offering, and attempt to put Microsoft at the forefront of the gaming space.
Rebooting Xbox
This spending spree began in 2018 with Compulsion Games, Undead Labs, Playground Games, Ninja Theory, Obsidian Entertainment & InExile. All talented studios, with lots of room for growth if given the time and money to do so. At the same time Microsoft also announced they were building a ‘AAAA’ studio from the ground up, headed by Darrel Gallagher. This studio was named The Initiative. Given the understanding that Microsoft and Xbox were committing to growing it’s first party offering, coupled with Phil Spencer becoming EVP of Gaming, It seemed like a pattern for selecting acquisition targets was forming… This seemed to be reenforced with the announcement of the Double Fine acquisition a year later in 2019.
These moves were extremely well received, and Xbox was gaining hype from gamers and the press at levels not seen since the days of the Xbox 360, despite the multi-billion dollar acquisition of Mojang a couple of years prior. After these announcements Microsoft, Phil Spencer and even Satya Nadella were stating that Microsoft were not done buying yet. This led pundits everywhere to think, okay, well who next?
The Xbox statement of intent!
Moving past E3 2019, industry commentators, insiders and the public in general continued speculating about their next purchases, with names such as IO Interactive, Bungie and others all being touted. In the end Microsoft blew all these theories out of the water, along with what we all assumed were the ‘types’ of studios they were looking at purchasing with the Zenimax acquisition announcement. This $7.5 Billion dollar monster deal included 8 studios, including the famous Bethesda Game Studios, a Japanese studio (Tango Games) and even came with its own publishing arm.
Very quickly, the ‘outlook’ had changed significantly. Suddenly, speculation of Microsoft buying EA, Ubisoft and other big publishers was arising and seen as plausible. Claims that only a year before would have been poo-pooed and disregarded as ridiculous by most sensible people.
At 23 studios, Microsoft were still saying that they are not done spending yet. Despite this, after such a big acquisition it was expected that Microsoft would slow down it’s acquisitions. This seemed to be coming true too. Through 2021, no new acquisition announcements were made, other than the confirmation of Zenimax. The narrative and thoughts had moved to working in partnership with studios and acquiring those that they had success in working with, ensuring the fit was right for all parties. IO Interactive still touted as a potential target, along with Avalanche, Crystal Dynamics and other studios with exclusivity deals with Xbox. While this is probably forming part of their long-term acquisition strategy, Microsoft’s acquisition strategy seemed greater than anyone predicted.
For Microsoft it’s about more than just IP
This being confirmed with the Activision Blizzard announcement. $69.7 billion being not just the most expensive acquisition in gaming, but the biggest in technology to date! In unpacking the news relating to this I got to thinking and I want to home in on something Satya Nadella said in an interview the announcement. He spoke of Microsoft’s plans for growth of the Metaverse, and mentions the benefits of the technologies that have been acquired along with Activision Blizzard. (Although the same could also be argued of the Zenimax deal.) I don’t just mean game engines here. VR tech, streaming tech, IP and systems.. The ‘experience layer’ of the metaverse…
In short, Microsoft sees gaming and its tech, as a way of strengthening many avenues of their business. An early example of this happening is the positive impact on the Azure side of the business. The technologies that gaming uses and produces are going to form the backbone of how we use technology moving forward. And Microsoft, Satya and Phil both know it. This makes me think about when Phil Spencer spoke about his excitement for their plans that are ‘10 years’ out, about 4 years ago in 2018 which we now might have some idea of… But I digress.
With the Activision Blizzard deal, Microsoft also finally got themselves a very successful mobile games developer. Creators of Candy Crush, King. If they are to truly hit the audience numbers they want in gaming(billions), like they did with the Windows operating system, they need mobile developers, mobile games and a more global audience. Their plans for game streaming will help to help make this possible, but the execution is not quite there… Yet.
So, where do Microsoft and Xbox go from here, in terms of acquisitions of video game studios/publishers?
Who is next on the Xbox acquisition list?
What I have learned, is that Microsoft’s strategy is grand and multi-facetted. On Microsoft’s shopping list, I am sure, will be more player(s) in the mobile gaming space. Potentially something in the VR/AR space or with VR/AR technology patents. And players who successfully work with Microsoft in the live service space, such as IO Interactive and Avalanche. I also think they will look at addressing significant gaps in their content, like game genres or localisation etc.
Other things that they will consider, like I imagine they did with the Zenimax and Activision deals is, who could they lose the studios to? Tencent? Or Google? What technology would come with any acquisition, and the benefits it could have on the wider Microsoft business.
If I had to venture an educated guess, I would say the most likely purchases Microsoft & Xbox will make, based on my speculation and combined with theories I’ve heard are: Avalanche, IOI, Studio Wildcard, SEGA, Bandai Namco, GungHo Online Entertainment & Nexon, although I hear Tencent is trying to acquire the latter.
These I feel, would tick all the boxes including Microsoft working on the tech and having exclusivity in some way. They would hit the regional absence of Asian gamers, notably Japan. They would also hit the mobile gaming, technology and beating out competitor boxes. To the ‘American companies can’t buy Japanese companies’ crowd, I would like to point you to Zenimax and Tango, no obviously both under the Microsoft umbrella anyway.
I would like to add a disclaimer too. These are just my educated guesses. I simply think that they fit what we know (or think we know) of Microsoft’s acquisition criteria. I can also see them shopping for studios in African countries or others in Southeast Asia.
What do you think of my speculation? Any that you agree or disagree with? Do you think I have missed anything glaringly obvious? Let me know in the comments or on Social Media. Also stay tuned for my ‘PlayStation Acquisitions – What next’ article coming soon! To read more about some past Xbox acquisitions, follow this link.
