Microsoft agrees to buy Activision Blizzard for nearly $70bn, a big bet on the metaverse

Microsoft agreed on Tuesday to buy Activision Blizzard, the video game maker behind hits like Call of Duty and Candy Crush, for $68.7 billion in cash. It is the largest takeover in Microsoft’s 46-year history and a big bet on its future direction.

The deal plants Microsoft’s flag in the emerging battle for dominance in the so-called metaverse, the next-generation internet that melds the traditional online world with virtual and augmented reality.

It is also a challenge to regulators in Washington, as Democrats and Republicans alike have pushed to limit the power of technology giants.

In buying Activision, which faced accusations of sexual harassment and discrimination that senior executives ignored, Microsoft appears to be rebuffing a controversy about the game maker’s workplace culture. The allegations have weighed on Activision, with its shares falling 27% since California sued the company in July over the matter.

The transaction may be seen as a victory for Bobby Kotick, Activision’s longtime CEO, whom some critics had sought to oust over the controversy. Kotick negotiated a big premium for investors — Microsoft is paying $95 a share, roughly 45% above his company’s stock price before the announcement — and will continue running the company.

Microsoft would gain Activision’s nearly 400 million monthly gaming users and access to some of the world’s most popular games, which are expected to form a cornerstone of the metaverse. Combining with Microsoft will also give Activision access to a vast array of artificial intelligence and other programming talent.

It would give Microsoft a significant boost in particular against Facebook, whose renaming of its parent company to Meta underscored its commitment to the metaverse. Adding Activision could bolster the virtual reality offerings from Microsoft’s Xbox unit as it competes with Facebook’s Oculus system.

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Satya Nadella, Microsoft’s CEO, said in a statement.

The deal would also drastically transform Microsoft. Despite owning Xbox and the studios behind Minecraft and Halo, the company has remained largely focused on corporate users for software like Office 365 and especially Azure, its cloud-computing business that competes with the likes of Amazon and Google.