Activision Blizzard: Meta let Microsoft go first – is Ubisoft more attractive?

Activision Blizzard: Meta let Microsoft go first – is Ubisoft more attractive?

Meta CEO Mark Zuckerberg had the opportunity to buy Activision Blizzard – but passed. Could Ubisoft be more attractive?

On January 18, the bombshell burst: Microsoft is buying Activision Blizzard for around $69 billion, subject to approval from U.S. antitrust regulators. Microsoft says it intends to “accelerate the growth of Microsoft’s games business across mobile, PC, console and cloud and provide building blocks for the metaverse” by buying numerous extremely well-known and popular game brands.

Meta passed on Activision-Blizzard acquisition

In November 2021, Activision-Blizzard CEO Robert “Bobby” Kotick came under fire after the Wall Street Journal published that he was aware of sexual assault at his company but did nothing about it. Kotick also allegedly tried to prevent reports of these assaults from becoming public.

Activision Blizzard came under increasing pressure after the WSJ report. The stock market price lost about a quarter of its value in the weeks following the report. Immediately after the publication in mid-November, Xbox boss Phil Spencer is said to have contacted Kotick to set up the takeover.

However, according to Bloomberg’s sources, Kotick and the board were not convinced of Microsoft as a takeover partner and listened around the market for other potential buyers. Meta was also approached and “at least one other large company.” Apparently, Meta showed no interest and Activision Blizzard went to Microsoft again.

Kotick will remain CEO of Activision Blizzard for now, but will likely leave with a severance package of a suspected $375 million when the acquisition closes in 2023.

Activision Blizzard: Why didn’t Meta grab it?

With the purchase of Activision Blizzard, Meta could have gained a lot of attention in the gaming market in one fell swoop – but only on paper. In practice, Meta lacks the infrastructure to use Activision Blizzard’s brands profitably to grow its platforms. And that is ultimately what Meta is all about.

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Meta is investing and expanding heavily in virtual reality, but Activision Blizzard has largely ignored VR gaming. Rebuilding the existing brands specifically for VR would be an enormous effort – and would probably cause more resistance among game fans.

A smooth transition to more VR gaming is more likely than an abrupt change: The new format will probably be a supplement to conventional gaming on the monitor for many years to come, and will not replace it. It is, therefore, easier for Meta to buy up or develop VR-native content such as Beat Saber, and to enter into complementary collaborations with established studios to bring well-known game brands to its VR platforms. Meta has operated in this mode for years.

Could Meta snag Ubisoft?

One of those established studios is Ubisoft, with whom Meta already works closely. Ubisoft has plenty of experience in the VR space: the publisher has already launched numerous experimental VR games and also operates a VR arcade offering. VR versions of big game brands like Splinter Cell, Far Cry, or Assassin’s Creed have been on the cards for quite some time and are supported by Meta.

For Meta, Ubisoft would be an attractive and even favorable takeover candidate compared to Activision Blizzard. However, since Meta is already under observation by the US antitrust authority FTC because of numerous VR-specific acquisitions in hardware and software, a timely deal of this magnitude seems unlikely.

In any case, Meta is probably better served by first raising awareness of its own still-small VR platform with existing resources and collaborations, and further testing the market response to VR gaming. Zuckerberg’s Metaverse gamble is already full of business risks, even without mega-gaming acquisitions.

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Sources: Bloomberg, Wall Street Journal