As Microsoft battles to clear its $69bn takeover of Activision Blizzard with global regulators, it is worth asking what is the end goal. Of course, controlling one of the biggest developers in the world is the main goal. But what about how the deal will shape the future of Xbox, Microsoft's gaming plans, and the gaming industry as a whole?
The Past: Confusion
Microsoft's vision of gaming has changed drastically over the years. Back with the original Xbox, gaming was something of a hobby industry for what was then the biggest company in the world. It was a first attempt, a foray into consumer markets. It was also successful enough that Microsoft thought it could become a true consumer brand like Apple was in the process of becoming.
By the time the Xbox 360 launched, Microsoft was taking gaming more seriously as it tried to push into the consumer space. The company's vision of dominating hardware as it did the business realm was still alive.
Xbox Live came to the fore in this era and the Xbox 360 kept pace with the PlayStation 3 in terms of sales. Although, a lack of focus that categorized all of Microsoft's attempts to become a hardware giant crept into its gaming division. No, Xbox has never been a disaster on the scale of Zune, but it was a victim of Microsoft's unclear focus on hardware.
When Microsoft launched the Xbox One in 2013, its gaming division was becoming increasingly muddled. Shipping the console with Kinect for $100 over the PlayStation 4 was a disaster, with Sony winning the last generation of home consoles across just about every metric.
The company was falling apart as a consumer entity with its failed Lumia mobile division. As Steve Ballmer made way for new CEO Satya Nadella, there were increasing reports Microsoft could be willing to sell its Xbox brand. However, Nadella's cloud-first vision would not only rejuvenate Microsoft, but it would also breathe new life into its gaming division.
Suddenly the Xbox division had a genuine purpose. Microsoft's Xbox One goal of creating an all-in-one entertainment machine failed. Even so, the advent of the cloud era allowed Microsoft to leverage its own technology and start to position Xbox as an all-encompassing gaming platform that covers consoles, PC, and everything in between.
The Present: Building a Platform
With renewed interest in Xbox and gaming, Microsoft has spent the last several years building an ecosystem around its gaming brand. That ecosystem mostly centers on the cloud with services available to users if they are willing to come along for the ride.
Xbox Live (now Xbox Network), Xbox Cloud Streaming, and Xbox Game Pass. Microsoft is pushing its gaming output far beyond a simple console and games. Instead, the company is using Game Pass to drive an entire platform where gamers can play how they want and when they want.
If you're unfamiliar with Game Pass, it is a subscription service that is available across the following tiers:
- Console/PC Game Pass $9.99 per month: All Xbox Game Studios games (including same-day release), hundreds of third-party games, member discounts.
- Game Pass Ultimate $14.99 per month: All regular Game Pass benefits + EA Play (also PC Game Pass), Xbox Cloud Gaming, and Xbox Live Gold.
Since its launch, Games Pass has become a resounding success and attracts millions of subscribers each month. Microsoft chief Phil Spencer has frequently described Game Pass as core to Microsoft's gaming plans moving forward.
In some ways, Microsoft is attempting to democratize gaming with its Game Pass platform. Especially with Game Pass Ultimate, which now packages the Xbox Cloud Gaming service. This is Microsoft's game streaming offering which brings the titles of Game Pass to consoles, PCs, mobiles, and even TVs and other devices.
The Future: Content, Content, Content
Microsoft has put the services in place to create an Xbox ecosystem that provides access to games across platforms. In the past, the company's gaming chief, Phil Spencer, has talked about Microsoft's desire to create a Netflix of gaming. Game Pass, Live, and Xbox Cloud Gaming put the foundations in place, and Microsoft is now looking to add the building blocks.
And that means games. You may be thinking that Xbox Game Studios already has loads of exclusive titles to supplement third-party games. That's partly true, but Microsoft has recently said that it still lags behind Sony and PlayStation in terms of first-party games. To address this balance, the company is opening its wallet.
Back in 2021, Microsoft spent $7.5 billion to purchase ZeniMax Media, the owner of the game studio Bethesda. This acquisition brought the Elder Scrolls and Fallout franchises under Microsoft's control, while also future major releases such as Redfall and Starfield. While those are all likely to be successes, none are the sure thing Microsoft wants.
This brings us to Activision Blizzard and why Microsoft is willing to spend $69 billion to acquire the publisher. Activision is home to major franchises such as Candy Crush and Warcraft, but the jewel in the crown is Call of Duty.
And it is Call of Duty at the heart of the fierce opposition Sony is putting up against the Activision Blizzard merger. Sony has freely admitted that Call of Duty is essential to PlayStation and cannot be replaced by any other franchise. The company is clearly running scared that Microsoft may one day stop the party and make Call of Duty exclusive to Game Pass/Cloud Gaming.
It is a concern that regulators in the UK, Europe, and the United States share with Sony. Microsoft says it has no intention of limiting the availability of Call of Duty across platforms. According to the company, it makes more economic sense to keep the franchise on PlayStation and rival services. To emphasise this commitment, the company agreed to a 10-year license with Nintendo for Call of Duty. A similar offer is also on the table for Sony.
The dangers of a monopoly are being overplayed. Even so, there is no doubt that if Microsoft's Activision acquisition goes through, the company will finally truly arrive at the top of the gaming tree. It has been over 20 years since the first Xbox launched, but Microsoft is now ready to make its vision a reality.
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