Microsoft announced late last week that it would be acquiring game publisher Activision Blizzard for $68.7bn — a price that we are told makes this the most expensive deal ever for the gaming industry. That’s steep, sure, but arguably fitting for a company with this kind of pedigree. And, significantly, it says a lot about where the eggheads (of both tech and economic variety) think the industry is going.
Even if gaming isn’t your thing, you’re likely to be aware of Activision or have engaged with its wares; directly or through acquisition, Activision counts Guitar Hero, Call of Duty, World of Warcraft and Candy Crush among its titles — and soon these will fall under the Microsoft umbrella.
The US company got its start back in 1979 when four disgruntled Atari game developers walked and established the first-ever third-party game developer company. Their complaint is now one of those anecdotes of gaming and business lore: after perusing an Atari company memo they realised that collectively they (just the four of them) had created games responsible for around 60% of the company’s sales the previous year, or put another way had resulted in $60m in profit for their employer.
Not bad for anonymous (AKA uncredited) developers taking home $22,000 a year. They went to the bosses to ask for more — public credit for creators, and royalties — but were instead met with the company line that everyone was playing their part.
One of the founders, David Crane, would later claim they were told: “You’re no more important to those projects than the person on the assembly line who put [the cartridges] together.” On a philosophical-all-men-are-created-equal level that’s true, but it’s tone deaf and antithetical to the notion of authorship. For Crane and Co saw what they were doing as akin to writing a book or pop song, something they hoped Atari — owned by Warner Communications — would understand.
Disproportionality was the thing that stung, according to archive interviews in InfoWorld (1983) and Game Informer (2013). On one side of the business Warner was paying its recording artists royalties for their creations, but within Atari these creatives couldn’t even negotiate a bonus for their contribution. So they left and started something wholly new, upending the idea that all games companies start with a console or device.
This was a bold, industry-shifting move, or bodacious in the vernacular of the time: they were facing enormous public criticism and legal pushback from the maker of the very console they were planning to run their games on. Atari labelled them “evil” and accused them of stealing trade secrets, before suing them.
The case was settled in 1982 with Activision’s founders agreeing to pay royalties back to Atari. In fact, knowing what was coming, the founders actually bundled their legal fees and penalties into their fundraising efforts when starting the company.
And when the dust settled a shiny new principle had been established, and Activision went on to build its success with game authorship at its core. Every programmer was credited, and authorship was prominently attributed. In many ways it also legitimised sinking venture capital into software makers — which seems prosaic today but was pretty maverick at the time.
There have been plenty of corporate moves and deals in the meantime, notably the 2008 merger with Vivendi Games (parent of Blizzard Entertainment). In recent months, however, the company has been in the news for all the wrong reasons. In 2021, after a two-year investigation, the California department of fair employment and housing filed a lawsuit that alleges systemic discrimination against women in the company — including accusations of a “frat boy culture”, unequal pay and sexual harassment.
The lawsuit also alleges that company leadership failed to act on the issues, and this has led directly to a unionisation campaign. The bunfight — described as an employee revolt — is still on, but despite all that Microsoft said: thanks, we’ll have some of that. It’s even keeping CEO Bobby Kotick in place for now.
Assuming it makes it through antitrust scrutiny, Microsoft will be the third-biggest gaming company (behind Sony and TenCent). In 2020 it bought ZeniMax (of Doom and Elder Scrolls fame) and, in 2014, Minecraft developer Mojang.
Why this company, and why now, even as the culture wars rage inside it? Microsoft gave us plenty to work with in its announcement, writing: “With 3-billion people actively playing games today, and fuelled by a new generation steeped in the joys of interactive entertainment, gaming is now the largest and fastest-growing form of entertainment ... This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.”
There’s that word again: metaverse. For now, the digital worlds and characters that fall within Activision are discrete, but with this and its strength in cloud and virtual reality, Microsoft’s ability to achieve something like the typically imagined, overlapping-virtual-landscape metaverse takes a great step forward. But that’s a little like saying you’re making a movie when you’ve scouted locations and named your main characters. There’s still a long road ahead.
In the interim, the acquisition is a huge boost for Microsoft’s subscription gaming business, the Game Pass service — like Netflix for gaming. For nongamers, Game Pass doesn’t have the instant recognition factor of Spotify or Disney+, but it does have more than 25-million users who cough up $16 per month for access — a monthly revenue stream of $400m.
What this means for the unionisation efforts of Activision’s subsidiaries remains to be seen. Watch this space, and insert a battle royale or gaming metaphor of your choice.
• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.
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