Microsoft-Activision deal expected to close in FY 2023
Yahoo Finance's Dan Howley joins the Live show to discuss reports that Activision CEO Bobby Kotick would be leaving the scandal-plagued company after the acquisition by Microsoft is finalized in 2023.
- Welcome back to "Yahoo Finance Live," everyone. Well, Microsoft acquiring Activision, it's captured the attention of gaming investors and fans as the industry further consolidates. So what now, for the industry, for the employees, and for the fans as well, also for the CEO, who had presided over Activision Blizzard's storm of workplace misconduct even prior to the acquisition?
Here with more, we've got Yahoo Finance's Dan Howley. Dan, we want to bring you in on this, as we do know, you've been tracking this extremely closely. So what comes next?
DAN HOWLEY: So right now, what we're seeing is that Activision Blizzard CEO Bobby Kotick will leave the company after the acquisition is complete. He's going to stay on for a while. And then once everything has kind of settled, he will leave the company. That's according to reports that we're seeing right now.
And that's kind of a big deal. I mean, not kind of, it is a big deal, considering he's led the company for so long and because part of the controversy that's going on right now at Activision Blizzard is because of his handling of workplace discrimination and sexual harassment. You'll remember that there were reports that he knew about these different issues going on and didn't bring it up to investors. That's being looked at by the SEC.
There was obviously a part of a report, I believe, by "Bloomberg" or "The Wall Street Journal," saying that he had threatened to have an assistant killed basically over voicemail. So this is something that has been ongoing. There were walkouts demanding that Kotick basically resign or be fired by the board. The board stood by him, though.
But now that Microsoft has come in-- and according to the various reports, this is basically, Microsoft saw Activision Blizzard in a weak position and said, look, we can give you guys the money to basically make this kind of go away. Bobby Kotick leaves. We get Activision Blizzard. And we integrate our culture into the company itself. It will be better for everyone, including, obviously, employees. And that's kind of how this all went down.
Now, what this means for Microsoft is that they get that huge library of games. They're going to be able to further build out their Game Pass service, which, I mean, I use it, and it's an incredible deal. Eventually, they're going to raise the price on that, most likely, similar to how we've seen Netflix do over the years. They'll subsidize it right now. And then down the line when more people get on, they'll start to raise the prices.
It means that they'll be in the mobile gaming space. And it means they get a lot more exclusive titles. Now, what that means for gamers is great for the Game Pass stuff, especially if you don't necessarily have a good gaming laptop or a good console at home. You could play that on a Chromebook using the cloud service.
If you're a PlayStation or Nintendo player though, it's problematic because Microsoft's acquisition of Zenimax shows that they're willing to make titles from the companies that they acquire exclusive to the Xbox or PC, and that means that if you just spent $500 on a PlayStation and you were expecting to get access to the next Activision Blizzard title, you may not get that. And that's kind of the issue that we're seeing with this broader consolidation in the industry is that it's really making people kind of have to choose more and more over the consoles that they pick up.
Previously, you could get a console and figure, well, there's third party studios out there. I'll still be able to get access to plenty of games. Now that's not necessarily so much the truth. We still have a few big studios out there, but with Activision Blizzard gone, that's one of the big three outside of EA and Take Two-that are now kind of underneath Microsoft's umbrella.
AKIKO FUJITA: Dan, really quickly on the culture issue, some interesting reporting out from "The Wall Street Journal" about the timing of this. You kind of alluded to the fact that this came down, or the initial call was made around November when Activision Blizzard was going through all of these issues with sexual harassment in the workplace. How is that likely to go over with Activision employees?
I mean, sure, Bobby Kotick may be on his way out. But in some ways, this is kind of being framed as Microsoft giving him an out through this acquisition.
DAN HOWLEY: Yeah. And I think that's something that a lot of Activision Blizzard employees are responding, obviously, negatively to. A lot of them had, as I said, participated in walkouts, wanted Bobby Kotick gone. And now the idea that he's going to be able to make off with millions of dollars, obviously, is infuriating to a number of them. I follow a number of them on social media. And that's essentially what they're posting.
On the flip side of things for employees, it's good if you talk about the overall culture. Microsoft seemingly has a very good corporate culture on its side. The studios that are underneath Microsoft, especially the Xbox division, they don't seem to have those kinds of issues.
Phil Spencer, the head of Microsoft's gaming division, is well-regarded in the gaming industry by both industry insiders as well as gamers, by the way. That's pretty rare when you have gamers actually liking the head of a major gaming company like that. So it could be a very good thing for them in the long run, especially if they're able to integrate Microsoft's culture into Activision Blizzard's culture and kind of clean up the issues that they have going on there.
So I do think that they're obviously going to be very upset about Kotick getting kind of away with this to a degree. But they'll still be benefiting from the integration of Microsoft culture into Activision Blizzard, which would likely pay off for them in the long run.
AKIKO FUJITA: Yeah, these culture synergies are always challenging, right, in any kind of acquisition. And this could add to a layer of that. Staying in tech, we've got the Senate Judiciary Committee taking up debate on that bill, really looking at trying to curb the power of big tech companies. There's an interesting divide here that we've started to see between the big tech names like an Apple and then some of the smaller names like Yelp, who've now published this letter to senators.
DAN HOWLEY: That's right, yeah. This is the American Innovation and Choice Online Act. It's going to be debated in the Senate Judiciary Committee tomorrow, on Thursday. And basically, what we're going to see out of this-- and this is going to be Chuck Grassley and Senator Amy Klobuchar. And essentially, they're the ones that are kind of pushing this forward.
Basically what they're saying is they don't want tech companies to be able to self-preference themselves, meaning if you look at a Google search and you look up a destination that Google can't automatically put up the Google Maps directions, that's an idea of self-referencing. If you look for something on Amazon's website, Amazon Basics doesn't immediately pop up, or in the App Store in Apple or Google Play Store on Android, that their apps won't be at the top of the screen.
Now, if you do, by the way, search for things in those app stores, you will find that Apple and Google have moved their own apps down. You're not going to find them as the very first apps. But really, what we're starting to see here is, as you said, this divide between the big corporations and the smaller ones.
So a group that's being kind of helmed by the folks at BaseCamp, DuckDuckGo, Y Combinator, Yelp, they've released a statement in support of this legislation, saying that big tech companies, quote, "use manipulative design tactics to steer individuals away from rival services, restrict the ability of competitors to interoperate on their platform, use non-public data to benefit the company's own services or products, make it impossible or complicated for users to change their default settings or services or uninstall apps."
And those are certain things that you still find on the likes of Android and iOS, especially that unable to uninstall apps part. So I do think that we're going to continue to see this. Whether or not this legislation goes forward really depends on how much these senators are willing to stand up to big tech. Obviously, there's huge amounts of money being used for lobbying by these companies. We've seen it increase over the past couple of years as the Congress has started to look more at big tech.
But there are huge divisions between Democrats and Republicans as to how big tech should be corralled. There's problems with the way both sides see censorship or the issue of misinformation online, whether or not antitrust laws need to be introduced or current antitrust laws are enough. So it's still very much up in the air whether we'll actually see any kind of firm legislation even come to the full Senate floor or fully passed on its own. But right now, it's still very much up in the air.
AKIKO FUJITA: Yeah. And we've seen that divide among lawmakers in the number of hearings that we've been following that played out last year. But of course, that debate taking place tomorrow on that bipartisan bill. I know you're going to be watching that closely. Thanks so much for that.