It was sweet at first. When Xbox boss Phil Spencer took the stage at E3 2018 and announced the acquisition five notable studios – Undead Labs, Playground Games, Ninja Theory, Compulsion Games and The Initiative – the air in the Microsoft Theater went electric. It felt like the company was picking itself up a mistake in his business plan and finally, building an internal list of exciting games that could be exclusive to Xbox platforms. You know, some friends to keep the master chief company.
Today’s announcement that Microsoft buys Activision Blizzard, the largest third party in the video game industry, doesn’t feel so benign. Four years later and numerous acquisitions later, the Activision Blizzard deal feels like an extreme escalation of Microsoft’s plans and could mark a turning point in the video game industry as a whole, with negative ramifications for gamers and developers alike.
Public reaction to the takeover so far was mixed, which makes sense for several reasons: First, Activision Blizzard’s sheer size is scary, and this purchase represents more money and industry power than Microsoft’s previous gaming acquisitions combined. Second, Activision Blizzard is currently the subject of multiple investigations into allegations of sexual harassment and gender discrimination at the studio, where CEO Bobby Kotick has been in charge for the past 30 years, and has been largely uninvestigated. The Wall Street Journal reports that Kotick is ready to leave the company in a golden parachute once the Microsoft deal closes.
This is the first time Microsoft has received a confused reaction to acquisition news rather than outright praise, and that’s because it’s not a standard transaction. It’s the clearest sign yet that we’re in the era of video game industry consolidation.
In 2017, Microsoft lost the first-party IP battle to Sony and Nintendo. By the end of the year, Xbox had shut down two of its internal studios, Lionhead and Press Play, killing some hotly anticipated projects, and even with the Xbox Series X just around the corner, there wasn’t much to look forward to in the company’s software reserves. The announcement of the acquisition at E3 2018 was a sigh of relief for concerned Xbox fans.
As of February 2019, Microsoft had 13 studios and publishing organizations under the banner of Xbox Game Studios.
Microsoft
And then, in September 2020, Microsoft announced that it was Purchase of ZeniMax Media, the parent company of Bethesda, id Software, Arkane Studios and Tango Gameworks. The gaming world in general was excited, but a few people were also starting to look around with suspicion. These studios were a big deal – the stewards of Fallout, Doom, Dishonored, Wolfenstein, Deathloop, Starfield, and Elder Scrolls – and they’ve been added to Microsoft’s sizeable stack of mid-sized companies, more names in a growing list. That alone was reason to pause.
For most fans, the main question was what did the acquisition mean for games like The Elder Scrolls VI, which was part of a series that historically hit both PlayStation and Xbox platforms? Was Elder Scrolls VI basically coming to PS4 and PS5?
Turns out, probably not.
One year after Microsoft bought Bethesda Spencer told GQ that he believed the Xbox ecosystem was the best place for any franchise in the studio’s repertoire, including The Elder Scrolls VI. He almost confirmed that it would be exclusive to Xbox.
“It’s not about punishing any other platform because I fundamentally believe that all platforms can continue to grow,” Spencer told GQ. “But to be on Xbox I want us to be able to bring the full package of what we have. And that would be true when I think of Elder Scrolls VI. That would be true when I think about one of our franchises.”
Starfield, Bethesda’s sci-fi RPG developed for the ninth generation of consoles, will do it definitely be exclusive to Xbox Series X/S and PC, skip PS5 completely. Spencer’s comments make it clear that Xbox is aiming for exclusivity for its franchises, and after today’s $69 billion deal closes, that will include Activision Blizzard games.
Microsoft
Activision Blizzard is the largest third-party publisher in gaming, owning massive franchises like Call of Duty, Overwatch, Diablo, World of Warcraft, Hearthstone, and Candy Crush. As a third-party studio, Activision Blizzard was able to negotiate with the main platform owners to get its software onto the consoles and devices it wanted. This doesn’t always equate to same-day launches or in-game items, but generally this position has helped Activision Blizzard games reach as many players as possible on as many platforms as possible. Exclusivity agreements and distribution agreements are currently the main source of competition in the industry, allowing outside developers to advocate for their games without being committed to any particular console owner.
When a platform owner becomes the largest publisher in gaming, they completely reverse the script. It stuffs the script into a shredder, burns the scraps to ash, condenses the ash into stone, and then dumps it at the bottom of the Mariana Trench.
Take Call of Duty, a series with predictable annual installments, for example. Over the years, Activision has shifted loyalties between Microsoft and Sony, offering early access and exclusive game modes on Xbox platforms and then PlayStation, mixing everything along the way. Amidst all the backroom talk, bad blood, and better deals, it was always up to Activision to get the best deal on Call of Duty, damn it, console owners.
After the acquisition, that negotiation looks very different, if it exists at all. As the owner of Call of Duty, Microsoft can tell Sony to screw it up and keep one of the biggest franchises in the industry exclusively for Xbox platforms.
This probably won’t happen immediately, but it’s certainly a possibility down the line. In his blog entry Regarding the acquisition, Xbox’s Spencer did not specifically address Sony or Nintendo platforms, but did allude to the possibility of cross-platform support for Activision Blizzard’s franchises.
“Activision Blizzard games are played across a variety of platforms, and we plan to continue supporting those communities,” he said, without specifying what he meant by “platforms” or “support.” Remember that was the embassy to Elder Scrolls VI initially too.
Microsoft isn’t the only company finding itself in the middle of a daycare center: Sony recorded his 13th in-house studio, Housemarque, in June 2021 while Tencent is chugging along with ownership of Riot Games, financial stakes in a handful of giant studios, and the July 2021 purchase of LittleBigPlanet 3 developer Sumo Group. Even Valve has attracted a handful of independent developers over the past few years, including the team behind Firewatch and some members of the Kerbal Space Program.
MARK RALSTON via Getty Images
Microsoft’s purchase of Activision Blizzard just feels like the final push into a new era for the video game industry: consolidation.
While exclusivity deals can be a problem in the short term, this trend has a longer and more tragic end. It’s highly likely that there will be more acquisitions by Microsoft, Sony, and other big names in gaming, and these deals and subsequent companies are only going to get bigger as time goes on. With just a few major studios controlling a large chunk of the software pipeline, this could instill a sense of homogeneity among new titles and stifle innovation as each developer tries, actively or subconsciously, to adapt to the corporate environment around them.
Even with “creative freedom” built into their contracts, the acquired studios will all use the same QA process, funding agreements, marketing plan, management structure, and turnaround cycle; They will have the same bosses and be subject to the same supervision. And when all new products are the result of a unique perspective, they’re bound to feel familiar. Even stale. Boring.
Microsoft’s acquisition of Activision Blizzard is an escalation of the exclusivity system and represents a new way of doing business. Now and for years to come, consolidation is the name of the game.
Maybe someday we’ll get Consolidation 2: Blow It All Up And Make Everything Indie Again, but that might have trouble finding a publisher.
All products recommended by Engadget are selected by our editorial team, independently of our parent company. Some of our stories contain affiliate links. If you buy something through one of these links, we may receive an affiliate commission.
