The estimated $68.7 billion acquisition of gaming business Activision Blizzard by Microsoft is more than simply a tool in the tech giant’s battle for video game dominance.
It’s also about the metaverse, which is a hot issue right now, with companies ranging from Disney to Walmart vying for a piece of the digital pie that offers virtual worlds where people can someday explore, work, and play.
Microsoft’s metaverse plans look to include gaming in particular. The business stated in a press release on Tuesday that purchasing the producer of “Call of Duty” and “Warcraft” “would give building bricks for the metaverse.” Microsoft CEO Satya Nadella was noted later in the news release as adding that gaming “would play a major role in the development of metaverse platforms.”
It may have taken a long time for the decision to be made. After Facebook, now known as Meta, changed its name to reflect its bet on a virtually centered future, corporate metaverse interest appears to have soared. But, long before Mark Zuckerberg, Microsoft and Nadella were publicly discussing the idea’s potential — and acquiring companies with enormous gaming communities to give them a leg start.
Microsoft paid $7.5 billion buying ZeniMax Media, the parent company of Bethesda Game Studios, in 2020. In 2014, the tech behemoth spent $2.5 billion for the maker of “Minecraft,” Mojang.
“As the virtual and physical worlds converge, the metaverse…is emerging as a first-class platform,” Nadella said in April 2021 during a quarterly earnings call. Microsoft’s gaming communities, like “Minecraft” and its then-140 million monthly users, could grow into huge commercial marketplaces “as games evolve into metaverse economies,” he added.
That earnings call took place three months before Zuckerberg announced his ambitions for Facebook and the metaverse, teasing the company’s eventual shift into Meta in October.
Nadella contrasted the promise of the metaverse to how the tech world viewed the budding internet in the 1990s at Microsoft’s Ignite 2021 conference in November.
“When we talk about the metaverse, we’re describing both a new platform and a new application type, similar to how we talked about the web and websites in the early ’90s,” Nadella said in a keynote address at the conference. “It’s no longer just playing a game with friends. You can be in the game with them.”
Microsoft currently does not sell the type of commercial virtual reality headset required for such an immersive gaming experience. However, in June, Microsoft CEO Satya Nadella explained the economic benefits that metaverse gaming can already provide: During a chat with Phil Spencer, the CEO of Microsoft-owned Xbox, Nadella mentioned that the authors of tens of thousands of “Minecraft” game modifications have made over $350 million by creating new landscapes for other players to explore.
“They’re creating entire college campuses on ‘Minecraft,’” Nadella said. Microsoft also profits off communities of gamers making in-game purchases, he noted.
According to an industry analysis released last year, in-game purchases might generate $34 billion in revenue by 2021. The Activision agreement may help Microsoft increase its cut: Candy Crush Saga is one of the most popular smartphone games in the world, with in-app purchases estimated to be worth more than $1 billion per year.
Microsoft’s metaverse bets aren’t confined to gaming, of course. Last year, Microsoft announced the debut of a Mesh cloud collaboration tool for virtual 3D corporate meetings. “can serve as a gateway to the metaverse.”
In May 2021, Nadella’s keynote address at Microsoft’s Build conference delved into what he calls the “enterprise metaverse,” where companies can use Microsoft’s business software products to monitor their supply chains in the metaverse, creating a “complete digital twin” of their real-world infrastructure to better track products from manufacturing to delivery.
However, Microsoft’s acquisition of Activision on Tuesday suggests that it may see gaming as a means to fight with Meta and other metaverse behemoths in the future. Indeed, Nadella has alluded to the possibility of several metaverses residing only within Microsoft’s gaming divisions.
“If you take ‘Halo’ as a game, it is a metaverse. ‘Minecraft’ is a metaverse, and so is ‘Flight Sim,’” Nadella said in November. “In some sense, they’re 2D today, and the question is: ‘Can you now take that to a full 3D world?’ And we absolutely plan to do so.”