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Speaker 1: Last October, Microsoft completed the acquisition of video game developer

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Speaker 1: Activision Blizzard for sixty nine billion dollars. Activision Blizzard is

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Speaker 1: the home of World of Warcraft, Diablo, and Candy Crush,

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Speaker 1: and the deal was a record purchase price for the

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Speaker 1: video game industry. It was also the largest single acquisition

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Speaker 1: by Microsoft in the company's history. At the time of

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Speaker 1: the deal, Microsoft became the third largest gaming company by

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Speaker 1: revenue in the world and touted its growth potential, particularly

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Speaker 1: in mobile gaming. Activision Blizzard CEO Bobby Kotik echoed these

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Speaker 1: sentiments on Bloomberg TV.

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Speaker 2: I think there were a lot of great reasons for

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Speaker 2: this merger. Mobile is an important part, and so building

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Speaker 2: this much larger audience of players is something that I

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Speaker 2: think Microsoft will continue to develop and enhance, and we're

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Speaker 2: really excited about the future of game as a result.

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Speaker 1: Fast forward to last week, when Microsoft announced it was

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Speaker 1: laying off nineteen hundred employees in its gaming division, mostly

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Speaker 1: from Activision Blizzard. Yesterday, it announced that Blizzard Entertainment, a

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Speaker 1: subsidiary of Activision Blizzard, would have a new president, Joanna Ferries.

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Speaker 1: She's a former NFL executive who had led the call

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Speaker 1: of Duty Esports division of Activision from twenty eighteen to

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Speaker 1: twenty twenty one, and then became GM of the franchise.

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Speaker 1: These changes reflect a remarkable transformation in a short period

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Speaker 1: of time. So what happened today on the show? We

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Speaker 1: called Jason Schreyer, a Bloomberg News reporter and creator of

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Speaker 1: Game on Bloomberg's Gaming newsletter to find out. This is

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Speaker 1: the big take from Bloomberg News. I'm Sarah Holder.

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Speaker 3: It all deflated last week essentially when this started hitting,

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Speaker 3: and so what happened was I leave It was Thursday morning.

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Speaker 3: News got out, and the news didn't get out through

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Speaker 3: people finding out whether or not they lost their jobs.

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Speaker 3: It got out through a company wide email, first from

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Speaker 3: Xbox boss Phil Spencer and then also from kind of

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Speaker 3: the division heads within each company. And it was just

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Speaker 3: chaos and confusion because people knew there were cuts happening,

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Speaker 3: but they didn't know if they were going to be hit.

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Speaker 3: A lot of people were asking me, hey, Jason, have

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Speaker 3: you heard anything like do you know which teams have

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Speaker 3: been impacted, which people are getting cut? Which was really

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Speaker 3: just kind of devastating.

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Speaker 1: This is the company that Microsoft just acquired this fall, right, Yes.

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Speaker 3: So the history here is that Activision Blizzard was a

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Speaker 3: big publicly traded company and Microsoft purchased them for sixty

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Speaker 3: nine billion dollars and it was a long slow process

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Speaker 3: for them actually closing the deal, but it closed in October.

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Speaker 1: And you've been there to follow sort of the optimism

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Speaker 1: at the beginning of this acquisition all the way to

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Speaker 1: the disappointing news last week. What happened.

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Speaker 3: So Blizzard is the maker of Warcraft and overwatching Diablo,

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Speaker 3: and they are kind of a subsidiary of Activision Blizzard,

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Speaker 3: and they have a long and storied history, have been

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Speaker 3: through a lot of corporate owners over the years, and

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Speaker 3: a lot of people there were really unhappy under Activision

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Speaker 3: and Activision CEO Bobby Kotik and his c suite for

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Speaker 3: a variety of reasons. There was a lot of kind

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Speaker 3: of corporate interference from them. A lot of policies came

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Speaker 3: down the pipe that they were not happy with. And

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Speaker 3: this is just a few weeks after the Microsoft acquisition.

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Speaker 3: Microsoft is coming in, they're saying the right things. Phil Spencer,

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Speaker 3: the boss of Xbox Microsoft's gaming unit, comes out and

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Speaker 3: he says, hey, we want to retain what makes Blizzard great.

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Speaker 3: We want to keep that magic going. We want to

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Speaker 3: let you guys have your independence. So people really were thrilled.

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Speaker 3: They were like, Wow, this is exactly what we want

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Speaker 3: to hear. Finally we have a new owner who gets it.

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Speaker 3: One important part of this whole equation is that as

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Speaker 3: part of Activision, Blizzard the publicly traded company, if Blizzard

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Speaker 3: delayed a game, which often does it is known to

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Speaker 3: do quite a lot, that would affect the stock price.

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Speaker 3: That would need to be explained to the board of directors.

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Speaker 3: Whereas now under a much bigger company in Microsoft, if

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Speaker 3: Blizzard delays a game, I mean, that's not impacting Microsoft stock.

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Speaker 3: That is not having a material impact on that. So

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Speaker 3: it gave Blizzard a lot of people a lot of

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Speaker 3: hope that they would be able to kind of maintain

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Speaker 3: that autonomy, be able to delay games, be able to

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Speaker 3: focus on creativity over the kind of predictable schedules that

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Speaker 3: Activision was pushing for.

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Speaker 1: Right one of the most disappointing things to people was

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Speaker 1: that Blizzard announced it was canceling this project called Odyssey

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Speaker 1: that was six years in the making. Can you say

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Speaker 1: more about the fate of that game?

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Speaker 3: I think that game had been kind of in a

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Speaker 3: little bit of danger recently, with or without the Microsoft acquisition,

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Speaker 3: and this is kind of ripping a band aid off,

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Speaker 3: And yeah, it's It's especially disappointing because Blizzard has largely

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Speaker 3: focused on a few of its biggest franchises, Diablo and

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Speaker 3: Overwatch and Warcraft, and this was it's stab at making

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Speaker 3: a brand new franchise for the first time in a while,

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Speaker 3: and so I think people were really excited about that,

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Speaker 3: and now they're a little bit worried that it'll be like, oh, Okay,

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Speaker 3: now you just have to focus on the big billion

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Speaker 3: dollar franchises we already have without leaving as much room

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Speaker 3: for creativity.

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Speaker 1: After the break, Jason shares his twenty twenty four predictions

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Speaker 1: for the gaming industry, including another fight ahead and a

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Speaker 1: potentially surprising new player. We're back. We've been talking to

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Speaker 1: Jason Schreyer, who writes Bloomberg's newsletter game On, which dives

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Speaker 1: deep into the video game industry. This month, he wrote

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Speaker 1: about another industry trend to watch out for this year,

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Speaker 1: unionization efforts. Given all this turmoil in the industry, you

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Speaker 1: mentioned looking ahead to twenty twenty four that the U

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Speaker 1: muonization effort in the video game industry could begin for real,

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Speaker 1: And you pointed specifically to Microsoft as a flashpoint for

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Speaker 1: building worker power. Do these recent layoffs help accelerate that

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Speaker 1: labor movement.

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Speaker 3: As part of this acquisition process, they actually came out

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Speaker 3: and they said, hey, we have signed a deal and

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Speaker 3: arrangement with the with labor unions, saying that we are

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Speaker 3: going to agree to a neutrality agreement where we promise

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Speaker 3: we will not interfere with any potential unionization efforts, in

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Speaker 3: direct contrast to Activision Blizzard, which before the acquisition had

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Speaker 3: been really clamping down on unit efforts. And so yes,

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Speaker 3: Microsoft has said that, and that I think gave some

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Speaker 3: people some hope that like, hey, if we try to

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Speaker 3: do this here, maybe we won't to have as much

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Speaker 3: resistance as we might have at other companies.

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Speaker 1: That's interesting. Microsoft presented itself as perhaps more labor friendly

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Speaker 1: than Activision Blizzard, But who knows how that will play

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Speaker 1: out after these layoffs.

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Speaker 3: Yeah, we don't know. I mean, Microsoft has a long

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Speaker 3: history of not being late were friendly, so we'll see

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Speaker 3: how that goes. But yes, they certainly agreed to and

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Speaker 3: it is a legally binding agreement that they said that

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Speaker 3: they signed and are going to be held to as

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Speaker 3: far as neutrality.

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Speaker 1: You also predicted that this year will bring more consolidation

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Speaker 1: of the industry. It's something you're watching out for. Can

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Speaker 1: you help us understand what that consolidation could look like.

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Speaker 3: I think the video game industry has followed the pattern

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Speaker 3: where there are some indie companies that have found success

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Speaker 3: and found big hits, and then there are some big

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Speaker 3: companies that have found success and found big hits, and

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Speaker 3: then in the middle it's just getting carved out for consolidation.

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Speaker 3: And so I wouldn't be shocked to see a company

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Speaker 3: like Uvisoft or EA, which are kind of big, publicly

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Speaker 3: traded companies but aren't quite hitting that at the same

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Speaker 3: level as some of their peers. I could see those

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Speaker 3: guys getting swallowed up by other companies, perhaps some of

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Speaker 3: the tech giants, the Amazons and Googles of the world,

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Speaker 3: or even companies in China or Saudi Arabia. Saudi Arabia

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Speaker 3: especially is going to be a buyer out there. And

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Speaker 3: so yeah, we're watching a lot of that stuff and

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Speaker 3: watching for more consolidation as the middle kind of gets

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Speaker 3: carved out.

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Speaker 1: You mentioned Saudi Arabia. I was so fascinated by their

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Speaker 1: potential entrance or expansion in the video game market. Can

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Speaker 1: you say more about why they'd be interested in that

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Speaker 1: space and what that might look like.

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Speaker 3: Saudi Arabia's twenty thirty vision plan that they've been talking about,

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Speaker 3: which involves a variety of industries. They are trying to

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Speaker 3: do two things. They're trying to move away from oil,

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Speaker 3: and they're trying to boost their public reputation in the

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Speaker 3: world's eyes. And to do that, they are entering a

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Speaker 3: bunch of industries. We've seen them make big plays in

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Speaker 3: the sports world, and we've seen them dive into esports,

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Speaker 3: to competitive gaming, and we're seeing them in the video

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Speaker 3: game industry. They recently bought a big company called Scopely,

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Speaker 3: which is a mobile games company that made a popular

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Speaker 3: game called Monopoly Go that has been a big hit

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Speaker 3: on mobile platforms, and I think they're out there looking

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Speaker 3: for other potential deals as well.

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Speaker 1: So I want to close on other sort of big

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Speaker 1: picture predictions you might have for the video game industry

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Speaker 1: in twenty twenty four. Looking ahead, What else do you

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Speaker 1: see coming?

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Speaker 3: Yeah, I mean one of this year's biggest trends is

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Speaker 3: going to be new hardware from Nintendo, and I think

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Speaker 3: a lot of people have their eyes on that are

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Speaker 3: curious to see what the successor to the Nintendo's Switch

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Speaker 3: looks like. Because the Switch was such a popular console,

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Speaker 3: sold so many units and is just beloved by players,

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Speaker 3: and so to see what Nintendo has in the pipe

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Speaker 3: to kind of follow up on that, it has a

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Speaker 3: lot of people really curious because if it's a hit,

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Speaker 3: that'll be really good news all around. If game developers

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Speaker 3: can get their products on there and be just as

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Speaker 3: successful as with the original Switch, I think that'll be

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Speaker 3: good news. And if this thing is kind of underwhelming

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Speaker 3: over price, whatever it is, I think that could be

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Speaker 3: a catastrophe for the industry at large.

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Speaker 1: Thank you so much for joining us, Jason, Thanks for

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Speaker 1: having me. Sir, thanks for listening to the Big Take

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Speaker 1: from Bloomberg News. I'm Sarah Holder. This episode was produced

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Speaker 1: by Alex Uguiera. It was edited by Caitlin Kenney and

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Speaker 1: Felix Jillette. It was mixed by Blake Maples. It was

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Speaker 1: fact checked by Tiffany Choi. Our senior producers are Naomi

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Speaker 1: Shaven and Jilda de Carly. We get editorial direction from

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Speaker 1: Elizabeth Ponso. Our executive producer is Nicole Biemsterbower. Sage Bouman

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Speaker 1: is Bloomberg's head of Podcasts. Special thanks to Jason Schreier

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Speaker 1: for his reporting. Thanks for tuning in. We'll be back

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Speaker 1: tomorrow