Yahoo Finance’s Dan Howley joins the Live show to discuss Microsoft’s new deal that will acquire video game company Activision Blizzard.
JULIE HYMAN: --this morning, waking us all up here on this holiday-shortened trading week. Our Dan Howley has been watching this deal-- $68.7 billion-- again, $95 a share. And we're talking about adding to the Microsoft properties "Warcraft," "Call of Duty," which is huge here, "Candy Crush." Dan, you cover the gaming industry very, very closely. Talk to us about the significance of this deal and what it is going to do to Microsoft's gaming franchise.
DAN HOWLEY: Yeah. This essentially makes Microsoft an even larger player, just below Sony and Tencent, as far as revenue for gaming. They essentially now have things that they didn't have before, meaning a massive mobile gaming presence in Activision Blizzard's King, something that Microsoft really doesn't have as of right now. They're going to get a "Call of Duty" mobile. They're going to get the vast number of "Candy Crush" games, and things along those lines, that pull in a lot of money for Activision Blizzard.
They're also going to get, as you said, those "Call of Duty" games. They're going to get legacy titles like "Crash Bandicoot" and "Tony Hawk." And they're also going to get, on the Blizzard side of things, like you said, "World of Warcraft," "Diablo," "Overwatch." And they're going to take over the gaming leagues that they have for some of those brands. So it really is a massive deal.
And just to give you an idea, in 2020, Microsoft-- in their 2021, sorry, shareholders meeting, they said that, the prior year, they saw gaming revenue exceed $15 billion with growth that was up 33% and they had as many as 33 billion hours played across their various platforms. So that's massive. But when you look at something like Activision Blizzard, you know, they came in with $8.1 billion in 2020 for their overall revenue.
Now, it's also worth pointing out that it still pales in comparison to Microsoft's overall revenue, which is $168 billion in 2021. They do, however, have a huge number of subscribers to their Game Pass service-- their Xbox Game Pass. That's where you can play online or you can play on other devices, whether that's your smartphone, your tablet, a Chromebook, anything along those lines. And they have 25 million subscribers there.
So I think this, basically, is a deal to further bolster their gaming capabilities. Obviously, whether that's through Game Pass, which is something that they clearly point to in their deck that they've released, as well as mobile, I think one of the things to look for here is the kind of consolidation, now, that we're seeing in the gaming industry, particularly driven by Microsoft. This is their largest deal ever, at $65 billion.
But what they're doing, this comes after they purchased ZeniMax, which was $7.5 billion, and that, really, was another gaming company that kind of sent shivers down in the gaming community's spine, because it was, is Microsoft going to cut off Sony and Nintendo from the titles that ZeniMax owned, which includes the "Elder Scrolls" series and things along those lines. So they have said that they're going to make their flagship title from that deal, the "Elder Scrolls", Microsoft exclusive for Microsoft and PC.
So now the wonder is, will they do that with titles from Activision Blizzard. And that could be a big deal, and it could sour a lot of gamers on Microsoft. So they're going to have to play this very, very carefully if they don't want to alienate the users that they rely so heavily on here.
BRIAN SOZZI: Yeah. And Dan, really, this deal comes hot on the heels of Take-Two buying Zynga for $11 billion. So the valuations on these mobile gaming assets are really heating up. But to your point on Sony, is this a bad day for you if you work at Sony?
DAN HOWLEY: I think it is, yeah. I mean, look, if you're looking at something like Activision Blizzard, as I said, you know, the titles that they have are some of the best out there, whether it's "Overwatch" or "Diablo" or, you know, the "Call of Duty" franchise, things along those lines. I think, you know, if you're a gamer, you've used or played, rather, Activision Blizzard games over the past however many decades.
And I think, you know, for Sony itself-- and don't leave out Nintendo from this as well, because they could be impacted by this as well. But I think if you're either of those two, you're looking at this deal this morning and saying, you know, man, how are we going to make sure that we keep those titles on our platforms. And you know, maybe it makes sense for Microsoft to ensure that they're available for everyone-- of course, that means a larger user base for them-- but I think if they're going to play it the way that they played the ZeniMax deal, they're going to take the marquee titles and they're going to make sure that you can only play them on Xbox.
And I think that would be troubling for gamers. And you know, the gaming industry is-- it's not like other industries. People sour on companies very quickly, and then turn around and stop buying their games. So you know, if that happens with Microsoft and Activision Blizzard, it could be very problematic for them.
JULIE HYMAN: Speaking of problematic, let's talk about the elephant in the room here, Dan Howley, and that is the ongoing investigation that Activision Blizzard has been doing regarding workplace conduct, and including sexual harassment in the workplace and gender-based harassment in the workplace. Now, our McKenzie Stratigopoulos just got a statement from the company-- from Activision Blizzard, that is-- addressing a report that crossed before the deal that was in "The Wall Street Journal" about them letting go a number of employees related to that investigation.
The company is confirming 37 employees have exited the company. Another 44 received written reprimands. And yet, it's-- Bobby Kotick, who has been leading the company for a while and built it to what it is, is still keeping his role here. Does Microsoft-- have we heard anything from Microsoft yet as to how they are addressing these issues?
DAN HOWLEY: They've basically said that, you know, they're welcoming Activision Blizzard, they want to have Microsoft culture kind of come together with Activision Blizzard culture. I think that's something that we're just going to not really hear very much comment on from either company. I think they're avoiding it. And look, that piece that you're talking about, where there was the idea that Bobby Kotick had held off on releasing reports on disciplinary action that Activision Blizzard was taking, you know, Activision Blizzard has denied that.
But you know, it would make sense if they were holding off on releasing reports until this deal, because it would have looked very bad for Activision Blizzard, and maybe Microsoft could have got them at a discount because of that, or maybe this is the discount that they got because of that. But you know, I do think that this is something that's going to continue to be a problem and plague Activision Blizzard until Bobby Kotick is gone or until they can say for sure that there is no longer any issue with the kind of personnel that they've had there.
But you know, that's a large number of people to be disciplined or let go, and it proves how large of a systemic issue this was at this company.
JULIE HYMAN: Yeah, $95, the discounted price, if so. That's-- that's quite something.