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Is the Activision-Blizzard acquisition the biggest backfire in gaming history?

Gaiff

Gaiff

SBI’s Resident Gaslighter
In light of Microsoft having to $250M to shareholders due to some funny business regarding the acquisition, it just reminded me of why Microsoft acquired Activision-Blizzard. However, their plans don't seem to have succeeded. Game Pass subscribers numbers have stagnated, COD day 1 will be pulled from the service, and it hasn't had the megaton effect Microsoft were hoping for. Now they're stuck with a $71B acquisition they would have been better off without. Furthermore, that move led to job redundancies that caused the layoffs of thousands of employees. Sony made some bad moves with its acquisition, namely Firewalk with its ill-fated Concord and now Bungie that seems to have become a liability. Those look like pocket change in comparison to Activision-Blizzard though.

Phil Spencer and Xbox's incompetence really shines through when they didn't seem to have a concrete plan for when this acquisition predictably wouldn't yield the expected results. Now it just looks like an albatross in their books they should have never touched.
 
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I think Bungie takes it right now.

Activision still makes a ton of cash.

Still a weird purchase though. I think the intention initially was to take everything exclusive until they realised that would have been an utterly stupid move.
 
I think the biggest backfire here was agreeing to give away exclusivity and streaming rights. Otherwise it wasnt worth it. Keep stuff like cod multi plat but everything else should have been exclusive to be worth it.
 
splattered said:
I think the biggest backfire here was agreeing to give away exclusivity and streaming rights. Otherwise it wasnt worth it. Keep stuff like cod multi plat but everything else should have been exclusive to be worth it.
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what else is there

www.activision.com

Activision | Games

View Activision's game portfolio, including games from the Call of Duty® franchise, Tony Hawk's™ Pro Skater™ series, Crash Bandicoot™ and more.
www.activision.com www.activision.com
 
clarky said:
I think Bungie takes it right now.

Activision still makes a ton of cash.

Still a weird purchase though. I think the intention initially was to take everything exclusive until they realised that would have been an utterly stupid move.
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I mean sure, but they also cost $69B. Microsoft didn't need this because it didn't do anything for them. All they did was taking on all the risks.

Bungie did cost $3B and seems to be bombing, but it's an L that can be written of within a few years. Activision-Blizzard will take a long time to turn a profit and that's assuming the value of its IPs doesn't tank over the years.

It's like Microsoft tripped on their own feet. They wanted to make COD exclusive and when that move didn't work, they doubled down and probably thought they could cook up a plan to flip this acquisition into a huge win. What mattered most was getting COD under their banner at all costs.
 
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I think the worst thing was Xbox acquiring Rare.

And PlayStation owning Bungie.

We would have a different story and more gems if Rare were with Nintendo.
 
They both overpaid. Without Destiny, their new IP rejected roundly and nothing else, a $750 million impairment and layoffs looming, where does Bungie's value come from? Even their human assets will be gone shortly.

Act/blizzard is still producing, and has been 'streamlined'. Diablo 4 is massive and has outlasted the difficult start it had, the portfolio has evergreen titles as well. Gamepass for CoD was a stupid idea so they will get a bounce in this years financials too.

Ultimately both were more expensive than they should have been, both were bad for gamers and both have been catastrophic for personnel. I feel no one has won here.
 
Gaiff said:
Sony made some bad moves with its acquisition, namely Firewalk with its ill-fated Concord and now Bungie that seems to become a liability. Those seem like pocket change in comparison to Activision-Blizzard though.
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Ok GIF


Putting absolute numbers aside, those failures damaged Sony just as much as Activision hurt Microsoft.

Microsoft market cap is 20 times larger than Sony's, the ratio of 3.6 to 71 billion creates an almost perfect economic parallel of 19.7x. Dollar for dollar relative to their size, Sony took just an equally devastating hit.
 
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clarky said:
I think Bungie takes it right now.

Activision still makes a ton of cash.

Still a weird purchase though. I think the intention initially was to take everything exclusive until they realised that would have been an utterly stupid move.
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Guess it depends how you look at it. Yeah Bungie is way more fucked than ABK. But $71 billion…. even if Microsoft only overpaid by 5%, that means they already pissed away the entire purchase price that Sony paid for Bungie.
 
Gaiff said:
I mean sure, but they also cost $69B. Microsoft didn't need this because it didn't do anything for them. All they did was taking on all the risks.

Bungie did cost $3B and seems to be bombing, but it's an L that can be written of within a few years. Activision-Blizzard will take a long time to turn a profit and that's assuming the value of its IPs doesn't tank over the years.
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Its turning a profit right now? The 70 billion space bucks didn't vanish, its an asset generating income. As long as its earning more than cash in the bank then its a win in sharholders eyes.
 
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It made money for people who invested in Activision knowing that it would artificially boost the value of the stock since Microsoft were massively overpaying for it. They bet that the deal would go through and made a tidy profit. People made money at the expense of the games industry. That's all it was supposed to achieve. What sort of world do you think you are living in where anyone important cares about this "backfire"?
 
clarky said:
Its turning a profit right now? The 70 billion space bucks didn't vanish, its an asset generating income. As long as its earning more than cash in the bank then its a win in sharholders eyes.
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It led to mass layoffs and a restructuring of the company. Furthermore, Microsoft's intention was not to acquire it just to acquire it without changing its direction. The main purpose was to bolster Game Pass and the Xbox brand, both which failed. They were better off without it.
 
Gaiff said:
It led to mass layoffs and a restructuring of the company. Furthermore, Microsoft's intention was not to acquire it just to acquire it without changing its direction. The main purpose was to bolster Game Pass and the Xbox brand, both which failed. They were better off without it.
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As a purchase that helped Xbox then yeah I'd agree its not added anything to the brand but clearly they are better of with it in a financial sense unless Activison has suddenly stopped earning bank since they took over.
 
clarky said:
I think Bungie takes it right now.

Activision still makes a ton of cash.

Still a weird purchase though. I think the intention initially was to take everything exclusive until they realised that would have been an utterly stupid move.
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DR3AM said:
Embracer Group
Bungie
And a million other studios that closed their doors

MS is winning
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This is so delusional.

Bungie was like 10% of the value of Activision. The Studio isn't doing well but the acquisition hasn't largely impacted PS in any major way. PS's current issues are a result of poor leadership decisions independent of Bungie.

Meanwhile, MS bought Activision Blizzard wanting to put all their games exclusively on Xbox and give their games away for free on GamePass. It was a frankly delusional move by Spencer.

Xbox sells like shit and GP has conditioned Xbox gamers to not buy games. So buying ActiBlizard would only result in two outcomes: 1) Spencer got his way and blew $70bln on a company only to tank its revenue and value, causing MS to write off more than $65bln... or 2) MS corporate stepped in and forced MS to keep Activision multiplatform to retain its value.

Evidently 2) became the outcome and even worse, the sheer scale of the acquisition drew the attention of investors that would have the MS board's fucking necks if they didn't deliver a crazy ROI... in which case Xbox was not only forced to keep Activision Blizzard multiplatform, now even Xbox Game Studio games had to go multiplatform in order to increase Xbox profit margins.

So the Acti deal fucked Xbox royally, turning the whole company into a third party game publisher---resulting in their hardware platform becoming utterly irrelevant and redundant.
 
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clarky said:
Its turning a profit right now? The 70 billion space bucks didn't vanish, its an asset generating income. As long as its earning more than cash in the bank then its a win in sharholders eyes.
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Yeah, Microsoft basically admitted this after the acquisition. All they need for it to do currently is fund the financing deal they leveraged for it yearly. After x amount of years it's theirs. The revenue should be funding the deal (I've no idea if thats the case but its not uncommon).

In isolation you can pick apart elements but it's something tangible at least. Ag least when you weigh up what due diligence must have been overlooked by whoever Sony had reviewing Bungies roadmaps.
 
TheThreadsThatBindUs said:
This is so delusional.

Bungie was like 10% of the value of Activision. The Studio isn't doing well but the acquisition hasn't largely impacted PS in any major way. PS's current issues are a result of poor leadership decisions independent of Bungie.

Meanwhile, MS bought Activision Blizzard wanting to put all their games exclusively on Xbox and give their games away for free on GamePass. It was a frankly delusional move by Spencer.

Xbox sells like shit and GP has conditioned Xbox gamers to not buy games. So buying ActiBlizard would only result in two outcomes: 1) Spencer got his way and blew $70bln on a company only to tank its revenue and value, causing MS to write off more than $65bln... or 2) MS corporate stepped in and forced MS to keep Activision multiplatform to retain its value.

Evidently 2) became the outcome and even worse, the sheer scale of the acquisition drew the attention of investors that would have the MS board's fucking necks if they didn't deliver a crazy ROI... in which case Xbox was not only forced to keep Activision Blizzard multiplatform, now even Xbox Game Studio games had to go multiplatform in order to increase Xbox profit margins.

So the Acti deal fucked Xbox royally, turning the whole company into a third party game publisher---resulting in their hardware platform becoming utterly irrelevant and redundant.
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Xbox fucked Xbox, not the Activision deal. Although it certainly was a stupid purchase it still turns a decent profit as far as im aware and has lots of active successful IP's

Bungie is close to being a complete right off, nothing delusional about that.
 
clarky said:
Its turning a profit right now? The 70 billion space bucks didn't vanish, its an asset generating income. As long as its earning more than cash in the bank then its a win in sharholders eyes.
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If they paid $71 billion and it's only worth e.g. $51 billion then yeah, $20 billion did indeed vanish.

They paid a huge premium for ABK. The justification for that price was that it would help sell Gamepass subscriptions + Xbox consoles + the expectation of continued rapid growth of ABK's revenue. NONE of those things came true.

Absolutely no way in hell MS would've paid $71 billion in 2022 if they knew the state of Xbox in 2026
 
They bought ABK and Bethesda in large part to starve Sony of content and make PS irrelevant.

Instead they tanked their own console business and as a result Sony still keeps all of those games on their platform, while no longer having to pay for timed exclusivity/marketing deals to boot. The acquisitions ended up being a net benefit for MS' main competitor. Doesn't get dumber than that.

Bungie was a smart idea but horribly managed. Sony needed to be laser focused on Destiny and getting D3 out, instead of wasting all of their resources on Marathon and their own internal live service flops. Destiny was already a proven GAAS with a loyal fan base and had tremendous cross media potential in terms of movies and shows. But in the end even if Bungie is closed it doesn't take down the PS division with it. It's merely squandered potential.
 
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Bungie is the biggest right now. ABK would have been if MS had kept Phil Spencer around and he kept trying to force COD into Game Pass day one. Still might be be the biggest eventually if Microsoft continues to mismanage ABK like they have the rest of Xbox.
 
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DonkeyPunchJr said:
If they paid $71 billion and it's only worth e.g. $51 billion then yeah, $20 billion did indeed vanish.

They paid a huge premium for ABK. The justification for that price was that it would help sell Gamepass subscriptions + Xbox consoles + the expectation of continued rapid growth of ABK's revenue. NONE of those things came true.

Absolutely no way in hell MS would've paid $71 billion in 2022 if they knew the state of Xbox in 2026
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They paid 71 billion in what 2022? Most tech stock has doubled in that time, including MSFT. Looks like it didn't vanish at all.

I don't follow stock super close these days so im sure someone will correct me if im wrong.
 
No, I would say Bungie is worse. Activision was extremely costly but it still makes a lot of money and at least in the long term there is a potential to generate a return. Bungie is just a loss at this point and it would take a miracle to make any of it back.
 
DonkeyPunchJr said:
If they paid $71 billion and it's only worth e.g. $51 billion then yeah, $20 billion did indeed vanish.

They paid a huge premium for ABK. The justification for that price was that it would help sell Gamepass subscriptions + Xbox consoles + the expectation of continued rapid growth of ABK's revenue. NONE of those things came true.

Absolutely no way in hell MS would've paid $71 billion in 2022 if they knew the state of Xbox in 2026
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I think it ended up being $22 billion in intangible assets and around $50 billion in goodwill from the purchase. They paid a substantial premium to get ABK to agree. It would have been cheaper to moneyhat ABK games onto game pass for the last 4 years.
 
I don't know about overall financially, but from now Xbox fan's perspective, absolutely.

Xbox no longer exists as a true console with any exclusive, console exclusive or otherwise, and that all seemed from the aquisition.

Not to mention how Microsoft was finally forced to publicly reveal just how much more dominant PlayStation is in attempts to get the deal approved. This only made consumers even more wary in choosing Xbox over PlayStation.
 
Ebrietas said:
They bought ABK and Bethesda in large part to starve Sony of content and make PS irrelevant.

Instead they tanked their own console business and as a result Sony still keeps all of those games on their platform, while no longer having to pay for timed exclusivity/marketing deals to boot. The acquisitions ended up being a net benefit for MS' main competitor. Doesn't get dumber than that.

Bungie was a smart idea but horribly managed. Sony needed to be laser focused on Destiny and getting D3 out, instead of wasting all of their resources on Marathon and their own internal live service flops. Destiny was already a proven GAAS with a loyal fan base and had tremendous cross media potential in terms of movies and shows.
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That's the strange thing to me. Their internal emails revealed they wanted to spend Sony out of business, but it doesn't even seem like they tried to with Activision Blizzard. With Bethesda, they obviously banked on them bringing out bangers and the killer app was meant to be Starfield, aka Skyrim in space, that they were probably hoping would sell 20M+ copies but ended up flopping. However, with Activision-Blizzard, they didn't even try to put obvious winners like Diablo IV or Doom Eternal as exclusives. In Diablo's case I suppose it makes sense because it's a GAAS, but the Xbox division always had that problem of coming up with a strategy, failing, and flip-flopping in the opposite direction without a clear vision or contingency plans.

It's actually shocking how poorly managed it has been for the past decade and a half.
 
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People laughed about the Minecraft purchase and it ended up making Microsoft billions. Activision did cost a lot, but in the end it could also pay off. Just Candy Crush alone probably still generates hundreds of millions in revenue every year.
 
clarky said:
I think Bungie takes it right now.

Activision still makes a ton of cash.

Still a weird purchase though. I think the intention initially was to take everything exclusive until they realised that would have been an utterly stupid move.
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Bungie is definitely a terrible purchase but I think the difference (and why ABK is worse) is that the ABK acquisition had a much bigger impact on Xbox then Bungie has for PlayStation.

Bungie is obviously losing PlayStation money but I don't think it will change the landscape of PlayStation overall. Xbox buying ABK cemented the fact they had to continue their path as a third party publisher and continue to focus on Game Pass.

I guess what I'm trying to get at is that buying Bungie was obviously a mistake but PlayStation have options because it ultimately didn't change the company much outside of losing money. PlayStation could sell Bungie much more easily then Xbox can sell ABK and wash their hands of it all.
 
Topher said:
Bungie is the biggest right now. ABK would have been if MS had kept Phil Spencer around and he kept trying to force COD into Game Pass day one. Still might be be the biggest eventually if Microsoft continues to mismanage ABK like they have the rest of Xbox.
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Bungie is absolute peanuts compared to Activision and they haven't damaged anything for Sony.
Their new game failed to become a mainstream hit while Destiny has faded.
So Sony simply overpaid for it imagining a different outcome and are now forced to admit the studio isn't worth what they thought it was by writing off costs, but this isn't the definition of backfiring.

Activision has backfired spectacularly by killing the Xbox console business and turning it into a third party publisher because the development expenses became too big to be sustained by selling games on Xbox alone.
Also COD is declining as well, this year with GTAVI people won't care about it as well, and last year's debacle has forced them to backtrack on offering it on Gamepass thus proving the financial non viability of the business model in gaming.
This is a backfire.
 
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Cakeboxer said:
People laughed about the Minecraft purchase and it ended up making Microsoft billions. Activision did cost a lot, but in the end it could also pay off. Just Candy Crush alone probably still generates hundreds of millions in revenue every year.
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Spend 70 billion just to get a few hundred million in revenues? They were getting 3-4% on that cash risk free.
 
Gaiff said:
In light of Microsoft having to $250M to shareholders due to some funny business regarding the acquisition, it just reminded me of why Microsoft acquired Activision-Blizzard. However, their plans don't seem to have succeeded. Game Pass subscribers numbers have stagnated, COD day 1 will be pulled from the service, and it hasn't had the megaton effect Microsoft were hoping for. Now they're stuck with a $71B acquisition they would have been better off without. Furthermore, that move led to job redundancies that caused the layoffs of thousands of employees. Sony made some bad moves with its acquisition, namely Firewalk with its ill-fated Concord and now Bungie that seems to have become a liability. Those look like pocket change in comparison to Activision-Blizzard though.

Phil Spencer and Xbox's incompetence really shines through when they didn't seem to have a concrete plan for when this acquisition predictably wouldn't yield the expected results. Now it just looks like an albatross in their books they should have never touched.
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yes all the head was Warcraft Diablo and cod he rest of their games with just license IP
 
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cormack12 said:
Yeah, Microsoft basically admitted this after the acquisition. All they need for it to do currently is fund the financing deal they leveraged for it yearly. After x amount of years it's theirs. The revenue should be funding the deal (I've no idea if thats the case but it's not uncommon).
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It's not that simple though. By that logic, any acquisition is worth it at any price and "funds itself" as long as it generates positive income.

MS paid 28x price-to-cash-flow ratio for ABK, meaning they spent $28 for every $1 ABK brings in annually. That kind of valuation only makes sense if they expect MASSIVE growth. Generally a ratio of 10-20 is considered a "good price" for a large established company. Over 20 is what you'd pay for a rapidly growing tech company.



Anyway I think this question is ambiguous. Bungie is undoubtedly a much shittier company than ABK. But in terms of how much total money was wasted, the ABK acquisition takes the cake.
 
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