What the deal with Microsoft’s Activision Blizzard means

So what do Microsoft buys Activision Blizzard really makes sense for casual game developers – and game platforms? First of all – it’s very complicated. No deal like this is transformative, and none can dramatically advance the path to the “future.”

But this acquisition — which uses more than half of Microsoft’s $130 billion cash equivalent, by the way — feels dramatically different from Trading ZeniMax / Bethesda, and not just in terms of the absolute amount paid.

The Bethesda deal, “just” $7.5 billion, sounds a bit more like “we want to own more great content and give Game Pass a big boost and this is a great way.” to spend some money.” This $68.7 billion Activision Blizzard deal is like “we see what other big companies like Apple and Facebook are planning for the future of the internet and games, and here’s our response.” “.

So let’s dive into the many angles in this deal. And we’ll end up in a place where we can decipher the ramifications for other people making games that aren’t owned by Microsoft.

What is even platform? Or (ugh) metaverse?

Where it gets complicated is the idea of ​​how a “game platform” is evolving. Sure, Xbox is a hardware platform – that’s the traditional usage of the word. But Game Pass is a platform that spans a wide variety of hardware — Xbox consoles, PCs, cloud-enabled mobile devices, and more.

And more than that, the game – Minecraft, Call of Duty, World of Warcraft, you get the idea – maybe platforms. Presumably, in Microsoft’s current parlance, “super-reverse platform”. While I know many of us are not fans of the heavily criticized word metaverse, due to its sentimental nature and Facebook try to command of the conversation surrounding it.

But the big companies need to come up with their own views on what the stock movement word is right now. That’s why Microsoft CEO Satya Nadella said as part of the Activision Blizzard announcement: “In games, we see the metaverse as a collection of communities and personal identities anchored in franchises powerful content franchise accessible on any device.”

So this is a clear sign that Microsoft believes a monolithic approach will fail. And Microsoft’s stance seems to be that “fun video game content for people on all devices” is the way to go. Thus, by combining a variety of in-app purchases, microtransactions, or subscription-based business models, you can:

• generate profitable revenue on all other people’s hardware platforms using your game platform (such as Minecraft), while…
• generate growth and profitability on game subscription (Game Pass) platforms that include games with multiple business models, including “pay-to-play” games.
• generate revenue – but not necessarily drive a lot of profit – on your actual gaming hardware platform (Xbox Series X).

Do you think you’re a bit confused about the definition of a platform? This isn’t just semantics, and it has real ramifications for game developers. For example, imagine if the only real money you could make as a game developer was to make your game in an interconnected universe controlled by a single company. control.

This is perhaps the ultimate ideal – implicitly, if not explicitly – for some of the biggest platform companies out there. Specifically, Facebook has a closed approach to its platform and seems to dream Mobile Internet’s successor is a company that offers the dominant metaverse. But that’s not where Microsoft is going.

The selling axis is forced to “open” by Microsoft

Perhaps it was a fatigue with the antitrust lawsuits of the ’90s and how they affected Microsoft’s culture, but Windows is generally an “open platform” for developers, and recent wars between Microsoft and Apple (specifically!) means that Microsoft is allergic to limited hardware platforms and distribution “taxes”.

Another quote from Nadella in today’s announcement includes the obvious Apple shade built into it: “Today, we face strong competition globally from companies that generate more revenue from game distribution than from our share of game sales and subscriptions. We need to innovate and invest more in content creation and less constraints on distribution.”

It is worth noting that Microsoft considers Apple a “bridge”, sitting there waiting for a 30% tax on any goods and services transferred to Apple on the iOS platform. Of course, Xbox platforms also levy a similar tax on third parties, albeit much less.

But being the underdog in the console war against Sony and having a parent company with deep pockets has allowed Xbox to break away from this traditional model and scale Game Pass dramatically.

(Especially, if your first-party games don’t actually fire on all pillars, that allows you to change your whole business model – you don’t really lose a lot of money when So this Xbox drawback became the Plus Sign.)

And you could certainly argue that “we come together to make or package something and charge for it” is cognitively better, than “we build a hardware platform and sitting there taxing everything that goes through it.” Xbox has received very good PR from fans as well as developers for this approach.

The real split of the deal for developers?

There won’t be major changes to the way game developers see the market right away: not today, tomorrow, nor the day the Activision Blizzard/Microsoft deal ends.

But the deal allows many of the industry’s biggest games to be ported to Microsoft’s business model. And that will push the industry to evolve further along that model, over time.

If you ask me what the model for games will look like in 5-10 years, I suspect it could be the following:

• If you’re working on a “pay once, play once” video game with any significant budget, or if you want to deliver millions of players to it at launch, you may need to put it on a budget. subscription service for success. Whether it’s Game Pass, PlayStation Plus or something like Netflix. These types of games will absolutely still exist, though!
• If you are creating a “Game as a Service” game that is paid but also has microtransactions in it, such as car theft 5/GTA Online? You are more likely to go it alone, but you may want to use a subscription service to find new players. And you get the rewards that a) a Game Pass-like service has to pay you to be included, and b) you get more money from its subscribers over time
• What if you’re a smaller game developer and you want to keep making games with whatever business model you want for open, subscription-free services like Steam? Then go for it! I don’t believe Steam intends to change its business model anytime in the future. And there will always be space for breakout hits to be made on these open services.

In the medium term, there could clearly be disadvantages for traditional game developers here. Here are some of the most obvious I’ve seen, and most are Game Pass-focused:

• If Xbox is moving more big games onto Game Pass – first from Bethesda, and now from Activision Blizzard – it will provide more selection and attention at the end of the titles. If Microsoft can continue to expand its user base, people will still watch smaller games on Game Pass. But there’s definitely a “getting bigger” situation here, especially since Micro-Reaction-Centered Games are often huge, slick, and attention-grabbing.
• It continues a larger trend that Microsoft is featuring Game Pass on its hardware platforms at the expense of “one-time regular paying games” not included in Game Pass. Anyway, indie developers never did that well on Xbox. But the lack of focus/exploration in the future will continue to work against them.
• As Game Pass and similar services become more important, the games that fall under those services will reach a larger audience. But the ones are no problem. And negotiating with Game Pass-like entities is essentially a middleman operation. You now have to get past another gatekeeper – the content gatekeeper, in this case – to enter the “big stage”.

In the end, I think most game developers wouldn’t really think about this deal. It’s another “bigger, bigger” deal, and it’s a “big tech companies are eating the world” deal, which is at least slightly offensive.

But it certainly comes from an organization that seems to be currently interested in video games and maintaining the creative independence of developers. That’s not always the case for some of the other big tech companies in the “we want the supermarket” space.

Microsoft as an organization is doing very well in its new role as a provider of high-quality content for everyone. But it’s using the parent company’s cash hoard to do so, which puts competitors like Sony at a huge disadvantage and puts their perfectly sound business model on the back foot.

Is that fair? I guess the different global governments will have to decide that. And if they’re okay with that, well… that’s capitalism, friends, and we’re all on our way.

Simon Careless is the founder of GameDiscoverCo, a company for game developers and publishers based on one simple problem: how to get players to find, buy, and enjoy their premium PC or console games friend? They run GameDiscoverCo newsletter.