Gaming wars: All you want to know about Microsoft-Activision, Take-Two-Zynga deals
Two mega deals in the space of barely ten days has put the spotlight on the mobile and video gaming industry, which has grown rapidly globally especially since the onset of the Covid-19 pandemic almost two years ago.
Earlier this month, Take-Two Interactive said it was acquiring Zynga for $12.7 billion. And on Tuesday, tech giant Microsoft announced the purchase of video game giant Activision Blizzard for a massive $68.7 billion in cash.
This is Microsoft’s largest acquisition to date, and more than double its No.2 takeover deals—the 2016 purchase of LinkedIn for $26.2 billion. So, what’s pushing companies like Microsoft and Take-Two deeper into gaming?
First things first, what are Zynga and Take-Two known for?
Zynga is a well-known mobile gaming company, and shot into the limelight with games like FarmVille and Poker.
On the other hand, Take-Two Interactive is best known for games you can play on computers and consoles. Its popular titles include NBA 2K and Grand Theft Auto.
So, how does Zynga’s purchase benefit Take-Two?
Clearly, Take-Two’s purchase of Zynga is driven by the need to establish a stronger foothold in the mobile gaming industry.
The two companies are also complementary, and not just because Zynga focuses on mobile gaming and Take-Two on consoles and PCs. In addition,
Zynga mainly makes games that are free to download and play, but require in-app purchases to keep on playing and progress. This keeps players hooked. The deal means Take-Two’s popular console games could potentially make their way into smartphones, expanding the company’s user base and, subsequently, its revenue.
But is the mobile gaming industry really as big as PC or console gaming?
Yes, it is. In fact, it is as big as PC and console combined. For instance, various industry estimates put the current size of the global mobile gaming industry around $80-90 billion. Revenue from PC games is around $30-35 billion. The estimated revenue from consoles such as Sony’s Xbox and Microsoft’s PlayStation is around $45-50 billion.
More importantly, it’s growing at a faster pace thanks to the rapid growth in smartphone usage and cheaper internet including in countries in India—a vast market of gamers.
This is not really a surprise because there are far more mobile-phone users than PC or console users. And mobile phones are becoming more and more powerful, allowing users to play heavy-duty games that would have earlier required laptops or computers.
Now, what’s the Microsoft-Activision deal? And what’s Activision’s claim to fame?
Microsoft will pay $95 a share for Activision. This pushed Activision stock sharply higher on Tuesday, and it ended the day 25% higher at $82.31 apiece. Microsoft’s shares, however, fell 2%.
Activision is known for popular games such as Call of Duty. Moreover, the deal brings another well-known title into Microsoft’s basket—Candy Crush. Activision had bought Candy Crush maker King in 2016 for about $5.9 billion. King now accounts for about a third of Activision’s revenue.
Hasn’t Microsoft bought gaming companies before? What exactly is Microsoft aiming for?
Indeed, Microsoft has struck gaming deals before, too. It acquired Minecraft maker Mojang for $2.5 billion in 2014. Last year, Microsoft acquired game maker Bethesda $7.5 billion.
The Activision deal, Microsoft’s biggest, will help the maker of Windows compete more effectively with Facebook—now known as Meta—on the virtual world called the metaverse since gaming dominates the virtual world.
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