Microsoft is acquiring Activision Blizzard, the companies announced Tuesday, but the deal isn’t exactly final. And even if the $68.7 billion deal is made official, Microsoft will still have many complicated situations to work out after the dust settles.
Between Activision Blizzard facing ongoing litigation and allegations of a toxic workplace, unrest at certain studios, a controversial CEO, and scrutiny from some state regulators, here are some of the issues Microsoft is facing with its acquisition of Activision Blizzard.
The Federal Trade Commission and the EU
Mergers of this magnitude must be approved by regulators, most notably the United States Federal Trade Commission, the US Security and Exchange Commission, the US Department of Justice, and likely the European Union. While deals like this are often unhindered, both the Federal Trade Commission and the EU have recently become more hostile to the idea of big-tech acquisitions, fearing further consolidation could lead to damaging monopolies.
One open question is whether Microsoft’s new deal will be treated as a tech acquisition or an entertainment acquisition. While big tech has come under close scrutiny in recent years, entertainment deals like Disney’s acquisition of Fox have come under less antitrust fears. While Microsoft is undoubtedly one of the biggest tech companies in the world, it’s possible that the video gaming issue will keep this deal firmly on the entertainment side of the FTC’s and EU’s radar. However, given that Microsoft has positioned this deal as an important game in the metaverse – a clearly big-tech-dominated space – it’s still possible that it could raise a few red flags.
If this is seen as a big tech deal, it’s likely to come under increased scrutiny. The recently appointed head of the FTC, Lina Khan, is likely to be tougher on Big Tech than previous heads of the organization, and President Biden gave one Executive order in July which announced his government’s intention to protect economic competition, particularly in the technology sector. In fact, just a few hours after Microsoft’s announcement, This was announced by the FTC that it’s embarking on a process to modernize its merger policies for large companies, particularly in the digital space — which could have a major impact on this particular deal.
Toxic jobs
Since July 2021, Activision Blizzard has come under heavy fire from all sides over allegations of toxic and allegedly criminal behavior in and around its workplace. The cases were brought to light mainly following various official legal complaints from US regulators, including one from the California Department of Equal Employment and Housing, one from the Securities and Exchange Commission, and one from the US Employment Commission.
The complaints contain allegations of sexual harassment, workplace bullying, degrading behavior and cases of sexism and racism. The complaints eventually led to a staff strike, the removal of esports sponsors, and multiple resignations and layoffs of high-profile employees from multiple different studios. Activision Blizzard has since settled several of the complaints.
Raven Software’s potential union
Since the July strike, many Activision Blizzard employees have formed a group together, called Activision Blizzard King Workers Alliance, with the intention of organizing colleagues to create a better working environment in the company.
In December, calls for organization grew even louder when many employees at Activision’s Raven Software studio went on strike (which is still ongoing) to pressure the company to reinstate several contractors who suddenly lost their jobs just before the holidays had been dismissed. The same group is also trying to unionize the studio.
This drive to unionize studios has continued throughout the video game industry in recent years, with employees from studios such as Paradox Interactive signing collective bargaining agreements and employees from nexon, a Korean studio, forms a union.
Union organizing tends to take a long time, which means that if Activision Blizzard employees were to organize on a large scale, it would likely be up to Microsoft to work with and recognize the unions themselves.
Bobby Kotic
Activision Blizzard CEO Bobby Kotick was a controversial figure in games for years. Criticism of Kotick only grew after the many allegations surfaced in the legal complaints, with many (including Polygon) calling for his resignation. Despite all of these alleged issues that surfaced during his time at the helm of the company, Kotick remains CEO of Activision Blizzard.
The initial news of Microsoft’s acquisition immediately sparked a passionate reaction that Microsoft must fire Kotick immediately — especially given that Xbox CEO Phil Spencer appeared to be condemning Activision Blizzard in the wake of the lawsuits. Of course, business relationships are not that simple. Major management changes are rarely announced in the middle of an acquisition, in part because the acquiring company has no control over the company it is trying to acquire.
According to a report by Wall Street Journal, Kotick is expected to leave upon completion of the merger, which is expected to occur in 2023, but don’t expect to hear anything definitive about Kotick’s future until the deal is finalized.
The public’s opinion on Blizzard
Aside from its cultural issues, Blizzard isn’t in the best of public perceptions on the video game side either. While Blizzard, separate from Activision’s library, has some of the most impressive IPs in any game, many of those games aren’t in a good spot right now. World of Warcraft suffers from its worst back-to-back expansions ever and a massive wave of player frustration during diablo 4 and surveillance 2 both languish in long and turbulent development processes. StarCraft intellectual property has remained largely dormant since 2015 StarCraft 2: Legacy of the Void, and the only games on the near horizon are mobile-only versions of Blizzard’s major franchises.
While this may be the rock bottom for Blizzard’s story-driven universes, it could end up being a good problem for Microsoft. Despite ongoing development of a new Diablo and a sequel of sorts to Overwatch, this is as close as it’s come since Blizzard has come to a square since its inception, which could give Microsoft and Blizzard a chance to get the studio back on track by they go back to some of his signature franchises. More importantly, with the addition of Xbox Game Pass, Microsoft will be able to release these new titles – and maybe even games like these World of Warcraft — in front of players for a flat monthly fee.
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