Microsoft’s purchase of Activision Blizzard could bring the Metaverse closer to Microsoft

Microsoft’s $68.7 billion move to buy the Activision Blizzard video game platform is not only a blockbuster deal for the gaming industry, but it also positions Microsoft to further focus its attention on the metaverse market.

The deal, which was announced on January 18, brings Microsoft the popular and action-packed ActivisionBlizzard range of games from “Call of Duty” to “Warcraft”, “Diablo”, “Overwatch” and “Candy Crush”, and provides Microsoft additional building blocks for its metaverse strategy, the company said in its press release. The deal is also expected to accelerate the growth of Microsoft’s gaming business across mobile devices, PCs, consoles and the cloud.

The acquisition will make Microsoft the world’s third-largest games company by revenue, behind Tencent and Sony, the company said.

“Gaming is the fastest growing and most exciting entertainment category on any platform today and will play a key role in the development of metaverse platforms,” said Satya Nadella, president and CEO of Microsoft, in a statement. “We are investing deeply in world-class content, community and cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to everyone.”

The transaction is subject to customary closing conditions and the completion of regulatory review and Activision Blizzard shareholder approval, the companies said. The deal is expected to close in fiscal 2023 and has received approval from both companies’ boards of directors.

For Microsoft, the Activision Blizzard deal creates a blueprint for Microsoft’s metaverse aspirations, a group of industry analysts says EnterpriseAI.

R. Ray Wang, Analyst

“What Microsoft does is they buy or build the stack,” said R. Ray Wang, Principal Analyst and Founder of Constellation Research, Inc. “They have… other gaming platforms, but Buying Activision Blizzard means they’re serious, they’re doubling down on that part of the business.

Wang said his research company sees 43 enterprise use cases for metaverse technologies, including providing service and support, improving collaboration, training and onboarding, and building new digital shopping centers and other roles. Microsoft will be able to play in some 38 of those markets, according to data from Constellation Research.

“Facebook has very little in the metaverse other than Oculus revenue,” Wang said. “It’s more of a consumer game for Microsoft right now, but they can come into the business. There’s going to be big business for that.

Some examples of this include being able to virtually show what a real customer experience will be like or putting a person virtually in a robot’s eyes so they can guide the robot to fix something on an oil rig, a said Wang. “I don’t want you flying to the oil rig because it’s too hard. But let me show you what it would be like, and you can be immersed on the oil rig to see what happens. In some cases, the user can use an exoskeleton and feel the haptic effects or feedback of their gloves.

Another analyst, Charles King, head of Pund-IT, said the acquisition “provides Microsoft with both a massive platform and substantial intellectual property that should be valuable for the future development of the metaverse.”

At the same time, King said, the metaverse is not yet ready for full-scale business. “Beyond the metaverse implications, this could be a huge step forward for Microsoft in terms of its position in modern entertainment, including top-tier online gaming, console/PC gaming, and sporting events and entertainment. In the short term, this is a bigger hit through the arcs of Amazon Prime, Google’s YouTube, Apple, and Netflix.

King said it would be interesting to know if Microsoft made the first move on the deal, or if Activision Blizzard offered it. “Given the size of the deal, it wouldn’t be surprising if other bidders were involved, but that’s just speculation on my part.”

James Kobielus, senior research director for communications and data management at TDWI, a data analytics consultancy, said the deal “certainly helps Microsoft position itself in the game, but it’s only ‘a small piece, and not necessarily the core, of what is commonly referred to as the metaverse.

Kobielus said he was struck that there was no specific link between virtual reality, augmented reality, digital twin or mobile commerce with the acquisition, “so it’s not at all clear that the metaverse is the right frame of reference to assess its importance”.

The potential future of the Metaverse depends on Microsoft’s final destination, Kobielus said. “It could be worth it the same way the cloud was worth it when Satya Nadella took over from the Gates/Ballmer era of Microsoft,” he said. “Look at how transformative the cloud has been for Microsoft over the past 10 years. Perhaps the metaverse – however defined – will propel Microsoft to the top of the cloud vis-à-vis AWS, which does not has yet to establish a clear vision or portfolio in this metaverse arena.

At Intersect360 Research, CEO Addison Snell said that by adding Activision Blizzard, Microsoft – which was already one of the top hyperscale companies and a leading presence in AI and online gaming – “allows the company to develop both with virtual universes, [which are now being called] the metaverse.

Dan Olds, Analyst

Dan Olds, director of research at Intersect360 Research, explained the deal, pointing out that Microsoft was able to buy Activision Blizzard “on the cheap” after a serious sexual harassment scandal took much of the share price’s value. shares.

Overall, the acquisition is good for Microsoft, Olds said.

“I think there will always be a lot of money in entertainment and the entertainment that matters these days is all digital and virtual,” he said. “Microsoft has already carved out a strong position in games and cloud gaming. They have Azure and have shown they know how to build and manage a cloud. The purchase of Activision is an extension of the strategy to find more ways to profitably build their online ecosystem. And that can be seen as an on-ramp to the metaverse for them, but we’ve yet to see the killer app for the metaverse. If the application killer emerges, so there will be something to say about the metaverse, until then, it’s all about games.

Companies, however, should be cautious about the Metaverse at this point, Olds said. “Right now, I don’t think companies should be collapsing in on themselves by embracing the metaverse,” he said. “I would watch it, but I would let other companies spend the money and bear the pain that inevitably comes with being an early adopter – or too early an adopter.”

Another analyst, Karl Freund, founder and principal analyst for machine learning, HPC and AI at Cambrian AI Research, said the deal with Activision Blizzard could help change that attitude, though. “Activision offers Microsoft a rich portfolio of environments ready to be extended to Metaverse worlds, putting it well ahead of Meta if Microsoft scales quickly,” Freund said. « Closing 2023 [date for this deal] seems late, however, so Meta’s Facebook has a window of opportunity. Nvidia offers digital twins to enterprises with Omniverse, [but that is] a different sphere.

As part of the agreement, Activision Blizzard CEO Bobby Kotick will continue in this role until the deal closes, at which time the Activision Blizzard business will report to Phil Spencer, the CEO of Microsoft Gaming.

The $200 billion+ gaming industry is the largest and fastest growing form of entertainment, according to Microsoft. In 2021, the total number of video game releases increased by 64% compared to 2020 and 51% of gamers in the United States reported spending more than 7 hours per week playing on console, PC and mobile. About three billion people worldwide play games today, which is expected to rise to 4.5 billion by 2030, according to the company. More than 100 million players, including more than 25 million Xbox Game Pass members, play Xbox games on console, PC, mobile phones and tablets every month.

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