Speaker 1: Last October, Microsoft completed the acquisition of video game developer
Speaker 1: Activision Blizzard for sixty nine billion dollars. Activision Blizzard is
Speaker 1: the home of World of Warcraft, Diablo, and Candy Crush,
Speaker 1: and the deal was a record purchase price for the
Speaker 1: video game industry. It was also the largest single acquisition
Speaker 1: by Microsoft in the company's history. At the time of
Speaker 1: the deal, Microsoft became the third largest gaming company by
Speaker 1: revenue in the world and touted its growth potential, particularly
Speaker 1: in mobile gaming. Activision Blizzard CEO Bobby Kotik echoed these
Speaker 1: sentiments on Bloomberg TV.
Speaker 2: I think there were a lot of great reasons for
Speaker 2: this merger. Mobile is an important part, and so building
Speaker 2: this much larger audience of players is something that I
Speaker 2: think Microsoft will continue to develop and enhance, and we're
Speaker 2: really excited about the future of game as a result.
Speaker 1: Fast forward to last week, when Microsoft announced it was
Speaker 1: laying off nineteen hundred employees in its gaming division, mostly
Speaker 1: from Activision Blizzard. Yesterday, it announced that Blizzard Entertainment, a
Speaker 1: subsidiary of Activision Blizzard, would have a new president, Joanna Ferries.
Speaker 1: She's a former NFL executive who had led the call
Speaker 1: of Duty Esports division of Activision from twenty eighteen to
Speaker 1: twenty twenty one, and then became GM of the franchise.
Speaker 1: These changes reflect a remarkable transformation in a short period
Speaker 1: of time. So what happened today on the show? We
Speaker 1: called Jason Schreyer, a Bloomberg News reporter and creator of
Speaker 1: Game on Bloomberg's Gaming newsletter to find out. This is
Speaker 1: the big take from Bloomberg News. I'm Sarah Holder.
Speaker 3: It all deflated last week essentially when this started hitting,
Speaker 3: and so what happened was I leave It was Thursday morning.
Speaker 3: News got out, and the news didn't get out through
Speaker 3: people finding out whether or not they lost their jobs.
Speaker 3: It got out through a company wide email, first from
Speaker 3: Xbox boss Phil Spencer and then also from kind of
Speaker 3: the division heads within each company. And it was just
Speaker 3: chaos and confusion because people knew there were cuts happening,
Speaker 3: but they didn't know if they were going to be hit.
Speaker 3: A lot of people were asking me, hey, Jason, have
Speaker 3: you heard anything like do you know which teams have
Speaker 3: been impacted, which people are getting cut? Which was really
Speaker 3: just kind of devastating.
Speaker 1: This is the company that Microsoft just acquired this fall, right, Yes.
Speaker 3: So the history here is that Activision Blizzard was a
Speaker 3: big publicly traded company and Microsoft purchased them for sixty
Speaker 3: nine billion dollars and it was a long slow process
Speaker 3: for them actually closing the deal, but it closed in October.
Speaker 1: And you've been there to follow sort of the optimism
Speaker 1: at the beginning of this acquisition all the way to
Speaker 1: the disappointing news last week. What happened.
Speaker 3: So Blizzard is the maker of Warcraft and overwatching Diablo,
Speaker 3: and they are kind of a subsidiary of Activision Blizzard,
Speaker 3: and they have a long and storied history, have been
Speaker 3: through a lot of corporate owners over the years, and
Speaker 3: a lot of people there were really unhappy under Activision
Speaker 3: and Activision CEO Bobby Kotik and his c suite for
Speaker 3: a variety of reasons. There was a lot of kind
Speaker 3: of corporate interference from them. A lot of policies came
Speaker 3: down the pipe that they were not happy with. And
Speaker 3: this is just a few weeks after the Microsoft acquisition.
Speaker 3: Microsoft is coming in, they're saying the right things. Phil Spencer,
Speaker 3: the boss of Xbox Microsoft's gaming unit, comes out and
Speaker 3: he says, hey, we want to retain what makes Blizzard great.
Speaker 3: We want to keep that magic going. We want to
Speaker 3: let you guys have your independence. So people really were thrilled.
Speaker 3: They were like, Wow, this is exactly what we want
Speaker 3: to hear. Finally we have a new owner who gets it.
Speaker 3: One important part of this whole equation is that as
Speaker 3: part of Activision, Blizzard the publicly traded company, if Blizzard
Speaker 3: delayed a game, which often does it is known to
Speaker 3: do quite a lot, that would affect the stock price.
Speaker 3: That would need to be explained to the board of directors.
Speaker 3: Whereas now under a much bigger company in Microsoft, if
Speaker 3: Blizzard delays a game, I mean, that's not impacting Microsoft stock.
Speaker 3: That is not having a material impact on that. So
Speaker 3: it gave Blizzard a lot of people a lot of
Speaker 3: hope that they would be able to kind of maintain
Speaker 3: that autonomy, be able to delay games, be able to
Speaker 3: focus on creativity over the kind of predictable schedules that
Speaker 3: Activision was pushing for.
Speaker 1: Right one of the most disappointing things to people was
Speaker 1: that Blizzard announced it was canceling this project called Odyssey
Speaker 1: that was six years in the making. Can you say
Speaker 1: more about the fate of that game?
Speaker 3: I think that game had been kind of in a
Speaker 3: little bit of danger recently, with or without the Microsoft acquisition,
Speaker 3: and this is kind of ripping a band aid off,
Speaker 3: And yeah, it's It's especially disappointing because Blizzard has largely
Speaker 3: focused on a few of its biggest franchises, Diablo and
Speaker 3: Overwatch and Warcraft, and this was it's stab at making
Speaker 3: a brand new franchise for the first time in a while,
Speaker 3: and so I think people were really excited about that,
Speaker 3: and now they're a little bit worried that it'll be like, oh, Okay,
Speaker 3: now you just have to focus on the big billion
Speaker 3: dollar franchises we already have without leaving as much room
Speaker 3: for creativity.
Speaker 1: After the break, Jason shares his twenty twenty four predictions
Speaker 1: for the gaming industry, including another fight ahead and a
Speaker 1: potentially surprising new player. We're back. We've been talking to
Speaker 1: Jason Schreyer, who writes Bloomberg's newsletter game On, which dives
Speaker 1: deep into the video game industry. This month, he wrote
Speaker 1: about another industry trend to watch out for this year,
Speaker 1: unionization efforts. Given all this turmoil in the industry, you
Speaker 1: mentioned looking ahead to twenty twenty four that the U
Speaker 1: muonization effort in the video game industry could begin for real,
Speaker 1: And you pointed specifically to Microsoft as a flashpoint for
Speaker 1: building worker power. Do these recent layoffs help accelerate that
Speaker 1: labor movement.
Speaker 3: As part of this acquisition process, they actually came out
Speaker 3: and they said, hey, we have signed a deal and
Speaker 3: arrangement with the with labor unions, saying that we are
Speaker 3: going to agree to a neutrality agreement where we promise
Speaker 3: we will not interfere with any potential unionization efforts, in
Speaker 3: direct contrast to Activision Blizzard, which before the acquisition had
Speaker 3: been really clamping down on unit efforts. And so yes,
Speaker 3: Microsoft has said that, and that I think gave some
Speaker 3: people some hope that like, hey, if we try to
Speaker 3: do this here, maybe we won't to have as much
Speaker 3: resistance as we might have at other companies.
Speaker 1: That's interesting. Microsoft presented itself as perhaps more labor friendly
Speaker 1: than Activision Blizzard, But who knows how that will play
Speaker 1: out after these layoffs.
Speaker 3: Yeah, we don't know. I mean, Microsoft has a long
Speaker 3: history of not being late were friendly, so we'll see
Speaker 3: how that goes. But yes, they certainly agreed to and
Speaker 3: it is a legally binding agreement that they said that
Speaker 3: they signed and are going to be held to as
Speaker 3: far as neutrality.
Speaker 1: You also predicted that this year will bring more consolidation
Speaker 1: of the industry. It's something you're watching out for. Can
Speaker 1: you help us understand what that consolidation could look like.
Speaker 3: I think the video game industry has followed the pattern
Speaker 3: where there are some indie companies that have found success
Speaker 3: and found big hits, and then there are some big
Speaker 3: companies that have found success and found big hits, and
Speaker 3: then in the middle it's just getting carved out for consolidation.
Speaker 3: And so I wouldn't be shocked to see a company
Speaker 3: like Uvisoft or EA, which are kind of big, publicly
Speaker 3: traded companies but aren't quite hitting that at the same
Speaker 3: level as some of their peers. I could see those
Speaker 3: guys getting swallowed up by other companies, perhaps some of
Speaker 3: the tech giants, the Amazons and Googles of the world,
Speaker 3: or even companies in China or Saudi Arabia. Saudi Arabia
Speaker 3: especially is going to be a buyer out there. And
Speaker 3: so yeah, we're watching a lot of that stuff and
Speaker 3: watching for more consolidation as the middle kind of gets
Speaker 3: carved out.
Speaker 1: You mentioned Saudi Arabia. I was so fascinated by their
Speaker 1: potential entrance or expansion in the video game market. Can
Speaker 1: you say more about why they'd be interested in that
Speaker 1: space and what that might look like.
Speaker 3: Saudi Arabia's twenty thirty vision plan that they've been talking about,
Speaker 3: which involves a variety of industries. They are trying to
Speaker 3: do two things. They're trying to move away from oil,
Speaker 3: and they're trying to boost their public reputation in the
Speaker 3: world's eyes. And to do that, they are entering a
Speaker 3: bunch of industries. We've seen them make big plays in
Speaker 3: the sports world, and we've seen them dive into esports,
Speaker 3: to competitive gaming, and we're seeing them in the video
Speaker 3: game industry. They recently bought a big company called Scopely,
Speaker 3: which is a mobile games company that made a popular
Speaker 3: game called Monopoly Go that has been a big hit
Speaker 3: on mobile platforms, and I think they're out there looking
Speaker 3: for other potential deals as well.
Speaker 1: So I want to close on other sort of big
Speaker 1: picture predictions you might have for the video game industry
Speaker 1: in twenty twenty four. Looking ahead, What else do you
Speaker 1: see coming?
Speaker 3: Yeah, I mean one of this year's biggest trends is
Speaker 3: going to be new hardware from Nintendo, and I think
Speaker 3: a lot of people have their eyes on that are
Speaker 3: curious to see what the successor to the Nintendo's Switch
Speaker 3: looks like. Because the Switch was such a popular console,
Speaker 3: sold so many units and is just beloved by players,
Speaker 3: and so to see what Nintendo has in the pipe
Speaker 3: to kind of follow up on that, it has a
Speaker 3: lot of people really curious because if it's a hit,
Speaker 3: that'll be really good news all around. If game developers
Speaker 3: can get their products on there and be just as
Speaker 3: successful as with the original Switch, I think that'll be
Speaker 3: good news. And if this thing is kind of underwhelming
Speaker 3: over price, whatever it is, I think that could be
Speaker 3: a catastrophe for the industry at large.
Speaker 1: Thank you so much for joining us, Jason, Thanks for
Speaker 1: having me. Sir, thanks for listening to the Big Take
Speaker 1: from Bloomberg News. I'm Sarah Holder. This episode was produced
Speaker 1: by Alex Uguiera. It was edited by Caitlin Kenney and
Speaker 1: Felix Jillette. It was mixed by Blake Maples. It was
Speaker 1: fact checked by Tiffany Choi. Our senior producers are Naomi
Speaker 1: Shaven and Jilda de Carly. We get editorial direction from
Speaker 1: Elizabeth Ponso. Our executive producer is Nicole Biemsterbower. Sage Bouman
Speaker 1: is Bloomberg's head of Podcasts. Special thanks to Jason Schreier
Speaker 1: for his reporting. Thanks for tuning in. We'll be back
Speaker 1: tomorrow