Microsoft expands into games and Xbox even further, buying Activision Blizzard for $68.7 billion

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Activision offers some of the biggest games in the world, including Call of Duty.

Activision

Microsoft made its biggest purchase ever on Tuesday, announcing an agreement to acquire scandal-ridden video game giant Activision Blizzard, in an all-cash deal worth $68.7 billion. The move would make Microsoft the world’s third largest video game maker while giving it control of some of the most popular games of all time, including the Call of Duty war simulation series and the giant fantasy World of Warcraft.

“Together with Activision Blizzard, we have an incredible opportunity to invest and innovate to create the best content, community and cloud for gamers,” Microsoft CEO Satya Nadella said on a conference call with investors on Tuesday.

The two companies presented the deal, which is set to close sometime within the next 18 months, as an opportunity to grow their respective franchises in the highly competitive and profitable video game industry. “It’s not about short-term results,” Phil Spencer, head of games at Microsoft, said in the phone call. “We’ve seen the Activision Blizzard product roadmap and are incredibly excited about what the teams are making and the company’s pipeline over the next many years.”

With Activision Blizzard, Microsoft hopes to position itself as one of the next big entertainment companies, though. Activision’s reputation for toxic work culture. Although Microsoft has long been associated with Windows and Office productivity software, the company has steadily expanded its efforts to lead the video game industry with its Xbox branding. She believes Activision is a major investment in the future of gaming.

Microsoft has offered its pending purchase of Activision, along with previous acquisitions such as Fallout and Death Maker Bethesda, as central to its efforts to build itself into a Netflix-like company, investing heavily in content that persuades people to pay subscriptions. “As our platform becomes more attractive, the flywheel for creators and gamers is accelerating as the creative reach on our platform continues to expand,” Spencer said.

The company expects to use Activision games in different ways. Microsoft sees games like Activision’s puzzle game Candy Crush Saga as a way to help it expand into mobile games. Meanwhile, it can use titles like the action-adventure games Diablo, Call of Duty, and the fantasy shooting series Overwatch to boost it. $15 per month Game Pass Ultimate Subscription service and Cloud gaming efforts.

While the deal presents a huge opportunity for Microsoft, it comes at a time of intense scrutiny for Activision, which has been mired in scandal, facing accusations of discrimination against its female employees and fomenting a “little boy” workplace culture. The accusations intensified this summer when the California Department of Employment and Housing sued the company over incidents of alleged discrimination and harassment. In September, the US Equal Employment Opportunity Organization accused her of violating the civil rights of employees and subjecting them to sexual harassment, discrimination during pregnancy, and retaliation. Activision Blizzard was quickly settled with the EEOC for $18 million.

Amid investigations and employee activism, Activision CEO Bobby Kotik has been accused of ignoring and promoting these issues, leading to calls for him to step down.

Microsoft said it plans to keep Kotick in charge of Activision Blizzard, and report to Spencer, who the company has pitched as a successful culture-change agent. “As the CEO of Microsoft, our organization’s culture is my number one priority,” Nadella said, noting the efforts he has made to Soften the historical ways of his own company. “We must continually improve the living experience of our employees and create an environment that allows us to continually drive daily improvement in our culture. This is hard work. It requires consistency, commitment and leadership that not only speaks volumes but walks the path.”

Microsoft shares on Wall Street, which already Valued the company at more than 32 times Activision’s purchase price, fell slightly after the news to $306.80, down 1% from today’s opening.

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