How Does Microsoft’s Purchase Of Activision Blizzard Impact Nintendo?

Microsoft is buying Activision Blizzard for $68.7 billion in cash (Image: Microsoft)

Microsoft caused a stir last year when it confirmed that its intended purchase of Zenimax had gone through, known better as the Bethesda deal. For over $7 billion Microsoft picked up Bethesda and a range of talented studios, with lots of discussion at the time over the impact of franchises like Fallout, Elder Scrolls and the upcoming Starfield being Xbox and PC exclusives. In what is increasingly becoming a very 2020s console war between MS and Sony it was a major blow, while from a Nintendo perspective it felt like another world, where two giants slugged it out as we enjoyed a bit of fun play on Switch.

Today’s news, that Microsoft has agreed a deal to acquire Activision Blizzard for $68.7 billion in cash, has caused an even bigger shock. The value of the deal is significant, as are the franchises and companies that could come under the company’s umbrella — Call of Duty, Crash Bandicoot, Diablo, World of Warcraft, Overwatch, Candy Crush and many more. We included the latter very deliberately — many of us would snort in derision at the mention of Candy Crush but, to be blunt, the value and revenues of Activision Blizzard’s mobile properties are also a significant part of the deal. People have also been bandying about the comparative ‘value’ of Nintendo compared to that fee; the numbers being used are nonsense, but it shows how frazzled and befuddled this event has made onlookers.

Crash Bandicoot will soon be a Microsoft IP
Crash Bandicoot will soon be a Microsoft IP (Image: Activision Blizzard)

Quickly, though, let’s clarify a couple of things. Though Microsoft has ‘bought’ Activision Blizzard, the transaction is far from complete. The respective boards have agreed a deal, but it still needs approval from Activision Blizzard shareholders; that will probably happen with little issue. The next question, however, will be how long it takes for regulatory approval, most notably in the United States and Europe. Major corporate takeovers are always assessed against monopoly laws and a slew of regulations. The odds are probably on the deal eventually passing, but it’ll be in the 2023 fiscal year at the soonest, so it could be a year or more from now before it’s all completed, assuming no issues along the way.

Microsoft, it should be said, is also likely benefitting from the issues that have blighted Activision Blizzard over the past year or more, making the gaming giant ‘vulnerable’ to a takeover like this. Its corporate culture has been condemned due to alleged poor treatment and abuse in multiple studios, and though current CEO Bobby Kotick will remain in his post while the takeover concludes, his position after the deal may be untenable. Time will tell, with ongoing court cases and legal proceedings that will bring more to light, although it seems inconceivable that Microsoft wouldn’t clean house the moment the deal goes through, especially given Xbox boss Phil Spencer’s previous comments on the Activision Blizzard situation.

Rather like Disney surveying its wealth in the past and opting to seek domination of film and TV media through the acquisitions of Star Wars, Marvel and 20th Century Fox, Microsoft is pursuing a similar strategy in the gaming space.

In terms of what’s going on and the contest Microsoft is in, there’s little doubt its primary target is Sony and PlayStation. The companies have been competing for the same console owners for two decades, in recent generations putting out hardware of near-parity in technical terms and often battling to be the lead system on major multi-platform titles, with exclusives then being a key extra piece. Sony came out well on top in the PS4 / Xbox One era and has trended ahead so far in this generation, but Microsoft has been transforming the market with the long game in mind.

Its focus on Game Pass, securing exclusives for the service through acquisitions, and a shift towards cloud and PC gaming as key areas to grow the Microsoft / Xbox brand — these are factors where the company is trying to go beyond the console + game sales = win formula. This acquisition, if it goes through, is exceptionally aggressive, due to the scale of the deal and the franchises that it’ll be able to seal away into its Xbox / PC / cloud-gaming bubble. When Microsoft talks about making gaming available to everyone, it means everyone via an Xbox login on PC / console, with streaming bringing mobile phones and tablets into the picture.

Rather like Disney surveying its wealth in the past and opting to seek domination of film and TV media through the acquisitions of Star Wars, Marvel and 20th Century Fox, Microsoft is pursuing a similar strategy in the gaming space. For Sony, there’s little doubt that this is starting to become an existential threat to PlayStation, though the company has a significant fanbase and wealth of IPs and resources of its own. Depending on your feelings, it’s perhaps a slightly unedifying spectacle.

Microsoft has a presence on Switch through key IPs
Microsoft has a presence on Switch through key IPs

So, where is Nintendo in all of this? Well, for one thing we’ve seen a very different dynamic between Nintendo and Microsoft in recent times, one that has generally been cooperative and friendly. Microsoft has brought some key titles to the Switch, with Minecraft being a continual hit on the system. We’ve seen relations that are evidently friendly enough for Rare IPs and games to feature on Switch, namely Banjo-Kazooie in Super Smash Bros. Ultimate and on Nintendo Switch Online. Throw in titles like Cuphead and the Ori games and there’s a pattern that Xbox is happy to share suitable content with Nintendo and take its publisher share of the royalties.

Nintendo, in many ways, has been operating a separate gaming bubble from Sony and Microsoft since Satoru Iwata took over the company and led it to release the DS and Wii.

There have been rumours in the past that Microsoft has tried to get Game Pass on the Switch, even as a streaming service — discussions may have taken place but even if they happened, that result never seemed likely. To host Game Pass would be a logistical challenge, and there’d be the question over how Nintendo would benefit financially, and how that would all filter down to the broader platform. In addition, having Game Pass on the system would arguably damage the eShop’s revenues. Though it’s been talked about a lot, it’s hard to see how it’d be in the slightest bit attractive to Nintendo.

As mentioned above, another conversation that’s reared its head today is ‘what if Microsoft bought Nintendo’. As is well documented, Microsoft tried and failed that one about 20 years ago, effectively being laughed out of the room. While the idea is fun to debate and joke around with (stay tuned for that), the reality is that Nintendo will neither be seeking a buyer nor need one. To suggest that Nintendo would entertain that idea arguably exposes a misunderstanding of corporate culture in Japan. Does Microsoft have the resources to make a fair offer to buy a company like Nintendo? Yes. Will it happen? Almost certainly not.

Nintendo, in many ways, has been operating a separate gaming bubble from Sony and Microsoft since Satoru Iwata took over the company and led it to release the DS and Wii. Instead of competing in gaming and graphical technology and horsepower, Nintendo became an entertainment company focused on concepts and content. That’s why each generation has two very distinct battles. Microsoft and Sony compete in one end, and on the other side Nintendo strives to succeed with its own unique brand of gaming. The industry is richer for having both sides.

In terms of the specific impact on Nintendo of Activision Blizzard becoming a Microsoft property, it could be minimal. Both companies have supported Nintendo hardware with suitable games, and that’s likely to continue. As we’ve said, Microsoft’s direct ‘fight’ is with Sony and in growing the global gaming market, but it hasn’t been averse to family friendly ‘Nintendo-like’ content being on Switch. It’s hard to see that ending, but it’s doubtful that Microsoft’s warm relationship with Nintendo of late will suddenly result in a Call of Duty Switch port.

Don't expect to see a Call of Duty port suddenly arrive on Switch
Don’t expect to see a Call of Duty port suddenly arrive on Switch (Image: Activision Blizzard)

In the bigger picture, there are significant questions around what Microsoft is trying to do, and the impact its potential success could have. We’ve drawn the comparison to Disney, and if Microsoft owns enough major franchises and provides a 5G friendly cloud service that thrives in untapped markets, it could start to dominate gaming. There are regions where many consumers are financially poor by European and North American standards but are nevertheless increasingly connected online and eager to enjoy more forms of entertainment — countries like India and Brazil are huge growing markets. In terms of ‘the West’, Microsoft could also win over a lot of console fence-sitters through sheer IP power in the years to come.

Nintendo, as a corporation, is very different to Sony and Microsoft. It’s smaller and purely focused on gaming and related entertainment, with solid expansion into other areas with licensed products like the LEGO sets, theme parks and the upcoming Mario movie. There’s no larger overarching business in which gaming is merely a ‘division’, and even in its most outrageously profitable years, Nintendo’s revenues are different in scale to the wider Microsoft corporation, for example.

Phil Spencer has used his company’s unrivalled buying power to assemble an imposing, impressive first-party IP catalogue, an area where Nintendo has always had the upper hand

Yet there’s perhaps a feeling that while Microsoft makes staggering moves, and commits itself to a very specific vision for gaming, Nintendo isn’t visibly making any equivalent leaps. The same could be said for Sony, but there’s noise about the company introducing a Game Pass-style service soon, and it’s been acquiring studios itself on a smaller scale; it will react to the Microsoft threat. Nintendo purchased Next Level Games, but elsewhere the strategy is ‘the norm’ — Nintendo Switch Online is relatively limited and focused on a handful of retro platforms and Animal Crossing DLC. ‘Cloud’ releases are typically from third-parties and aren’t highly regarded. The model is the same as usual, too — release games at the normal retail price, sell them, everyone’s happy.

And, to be fair, many of us probably are happy that Nintendo is still familiar and doing things ‘the right way’. The only question is whether, five years from now, Nintendo will be in tune with the rapid and daunting shifts we’re seeing in the industry, and whether it’ll react. There’s every chance that Nintendo will be as strong in five years as it is now, but these industry shaking moves from Microsoft do give pause for thought as we look long term. Phil Spencer has used his company’s unrivalled buying power to assemble an imposing, impressive first-party IP catalogue, an area where Nintendo has always had the upper hand.

It is, ultimately, a strange and disruptive time in the games industry. It’ll be fascinating to see what happens next in the wider market, and specifically how Nintendo navigates these mysterious, choppy waters in years to come.

Feel free to share your thoughts on this latest bombshell takeover below.



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