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Activision Blizzard goes independent with $8 billion buyout of Vivendi

Adam Rosenberg
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activision blizzard former rockstar employees
Image used with permission by copyright holder

Activision Blizzard is now an independent company following an $8.2 billion buyout from an investor group led by CEO Bobby Kotick of its former parent company, Vivendi, a press release confirms. The particulars of the transaction see the newly independent publisher buying back 429 million shares of stock from Vivendi for $5.83 billion while the investor group, which also includes Activision co-chairman Brian Kelly and Chinese investment firm Tencent Holdings, buys another 172 million shares for $2.34 billion. 

Bobby Kotick, Activision Blizzard CEO
Bobby Kotick, Activision Blizzard CEO Image used with permission by copyright holder

The completed sale leaves Kotick’s investment group in the lead shareholder position, with 25-percent of the stock. Vivendi hangs onto 12-percent of the company in the deal while the rest of the parent’s former 61-percent majority stake becomes public shares. The move is largely the result of Vivendi’s failed entry into the telecommunications market that left it with $17 billion in debt. One debt reduction measure considered by the company would have involved extracting $3 billion from Activision, a move that would have left the game publisher depleted and in a precarious position.

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That wouldn’t have been a good situation for either company. Vivendi could pay down some of its debt, sure, but at the cost of crippling one of its profitable holdings in Activision Blizzard. The buyout gives the now-former parent company an opportunity to ease some financial strain, with the $8 billion erasing a significant portion of its $17 billion debt. Activision, meanwhile, begins life as an independent with $3 billion in cash on hand “to preserve financial stability,” as Kotick said in a statement. 

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In short, this was a defensive move that benefits both companies in the long run. Vivendi continues to own a sizable chunk of a profitable entertainment company while Activision, led by Kotick, is free to adjust its strategies and pursue new money-making opportunities. The publisher maintains a rich portfolio for now, headlined by the success of Call of Duty and Skylanders, but some fresh successes will be needed as those franchises face increased competition and the aging World of Warcraft‘s subscriber numbers continue to slip.

World-of-Warcraft
Image used with permission by copyright holder

There’s no hint in the buyout announcement of how Activision’s strategy might change as an independent, though there’s opportunity in all three of the above-mentioned franchises. The launch of Microsoft and Sony’s competing next-gen consoles in late 2013 could potentially change the face of online gaming in the coming years as the cutting edge tech takes better advantage of high speed Internet and cloud-based computation than the previous-gen examples did.

Activision is already testing new models for Call of Duty with the China-exclusive (for now) Call of Duty Online, a free-to-play first-person shooter built on the core elements of the franchise’s competitive multiplayer component. The Tencent-published game entered its open beta phase earlier this year. If successful, it could inform the beginnings of a new financial model for Call of Duty in the next-gen. Many industry observers and analysts have suggested that the series could benefit from stripping the contents of the annual release offering to just the solo campaign and breaking out multiplayer as a separate entity driven by newer micropayment structures.

As a younger and fresher franchise, Skylanders faces fewer immediate threats than Call of Duty does, though the imminent arrival of toy-meets-video game releases like Disney Infinity and Angry Birds Star Wars II Telepods suggests that competitors are picking up on the brilliant success of pairing a physical action figure with an interactive experience. Next-gen hardware creates new opportunities here as well, though Activision will likely stick to the strategy that’s been working so far for Skylanders, for the time being at least.

Call of Duty Online
Image used with permission by copyright holder

A majority of the series’ younger target audience likely won’t be gaming on PlayStation 4 or Xbox One consoles in 2013/2014, so expect Activision to carry on with its efforts to bring new content to the older and more affordable consoles. Any expansion for Skylanders will likely move more in the direction of carrying the game into mobile markets. The series already has a presence in the iOS/Android marketplaces, but it hasn’t achieved the success that it has on dedicated gaming platforms. Activision will likely try to grow its influence in the world’s most rapidly growing gaming sector.

World of Warcraft is the most difficult to predict. The Blizzard team has done a great job of keeping the massively multiplayer online role-playing game alive and vital for almost 10 years, but it is increasingly seen as a relic of a different era in online gaming. A fuller embrace of a free-to-play structure for WoW is likely to happen at some point, but Blizzard’s future is in whatever’s coming next. For years now, we’ve been hearing about the developer’s so-called Project Titan, which is expected to be the studio’s successor to WoW. Little is known about what form it will take, but it’s probably going to draw more from the current free-to-play/microtransaction-driven income models than it does from its predecessor’s subscription-based approach.

These three franchises form the money-making core of Activision, but there are other opportunities as well, in the coming launch of Destiny, from Halo creator Bungie, and in any number of arenas that haven’t yet been revealed. Many of these changes were likely to happen with or without the buyout, but the shift in ownership leaves both companies in a much stronger place. That’s a win for gamers, as well. Activision won’t be crippled by Vivendi’s losses; instead, the game publisher walks away, flush with cash and income-earning assets, leaving it better able to compete in the next hardware generation.

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Adam Rosenberg
Adam Rosenberg
Former Digital Trends Contributor
Previously, Adam worked in the games press as a freelance writer and critic for a range of outlets, including Digital Trends…
Activision Blizzard fined over Diablo Immortal’s microtransactions
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Activision Blizzard is being fined by the PEGI (Pan-European Game Information) Complaints Board and Enforcement Committee over the inclusion of microtransactions in its 2022 mobile game Diablo Immortal.

This news comes just after Nintendo got sued in North America over its implementation of loot box microtransactions in Mario Kart Tour. However, this decision comes from the European game ratings board PEGI after a reassessment of Diablo Immortal's rating. Activision Blizzard, along with Hunt: Showdown Bounty Hunter -- Limited Edition publisher Plaion, got fined over not properly disclosing the presence of microtransactions in their games when disclosing information to PEGI for a game rating. That's a shocking omission in Diablo Immortal's case, considering just how much it entices players to spend money on the game.
"Both games were published in 2022 and although they contain paid random items (like loot boxes or card packs), this was not disclosed to PEGI when the games were submitted for a rating license," a description of the case says. "Since this amounts to a violation of the rules described in the PEGI Code of Conduct, the PEGI Enforcement Committee sanctioned both companies with a fine of 5000€. The companies had also taken immediate action to update relevant store listings and marketing materials."
A fine of only 5,000 Euros is an extremely small drop in the bucket for a company like Activision Blizzard; Diablo Immortal alone was estimated to be making $1 million a day around its launch by Appmagic. Still, it's a noteworthy slap on the wrist and will hopefully encourage companies like Activision Blizzard to be more open and honest about the presence and relevance of microtransactions in their games. 

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Why cloud gaming is the linchpin in Microsoft’s troubled Activision Blizzard acqusition
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The United Kingdom’s Competition and Markets Authority (CMA) delivered a shocker this week when it blocked Microsoft’s acquisition of Activision Blizzard on Wednesday. While a lot of focus on Microsoft’s fight was centered around whether or not the acquisition would give Xbox consoles an unfair advantage over PlayStation consoles, what ultimately decided it was a much smaller market: cloud gaming.
The idea of being able to stream the game you’re playing from the cloud has existed for well over a decade. Cloud gaming’s relevance to the video game industry has only grown over the past several years thanks to both failed and successful efforts from big tech companies like Google, Amazon, and, most importantly, Microsoft. Still, cloud gaming is considered relatively niche, with Activision Blizzard Bobby Kotick calling it "inconsequential" in an interview with Bloomberg and UCL Associate Profession Joost Rietveld saying it’s not a distinct market in a submission to the CMA.
Despite those pleas, the CMA claims that cloud gaming is a “nascent market” and that “already strong incumbent in this market even stronger” in its 418-page report on the matter. Following the CMA’s decision on Wednesday, I spoke to several different analysts to find more clarity about how big Microsoft is in the cloud gaming space and why the CMA should feel compelled to intervene. While experts mostly side with Microsoft over the CMA on this decision, one greater truth emerged from these discussions. Whether one thinks cloud gaming is relevant to this acquisition or not, this emergent style of gaming has reached a point of no return where it'll be instrumental to the video game industry going forward. 
Microsoft, king of cloud gaming
Cloud gaming may sound like a niche within the industry, but that's not entirely accurate. BrandFinance Managing Director Laurence Newell tells Digital Trends that “cloud-based services account for over 70% of Microsoft’s brand value, amounting to a staggering $137.5 billion.” That’s quite an eye-catching number that understandably would raise a regulator's alarm bells. However, Newell admits that gaming only makes up 8.5% of Microsoft’s revenue, and cloud gaming is an even smaller amount of that slice.
Despite its relatively small impact on the wider company, most of the experts I spoke to agreed that Microsoft has emerged as a cloud gaming leader thanks to its compatibility with a large segment of the Xbox Game Pass Ultimate library. Conversely, Activision Blizzard has had almost no cloud gaming presence outside of one Sekiro: Shadows Die Twice port on Google Stadia before that service’s shutdown. If it were to be acquired, it is inevitable that more Activision Blizzard games would likely come to cloud-based gaming services.

Despite the shutdown of Google Stadia and the relatively small brand value received from cloud gaming compared to the rest of the company, the CMA still points out in the press release about its decision that “monthly active users in the U.K. more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to 11 billion British pounds globally and 1 billion pounds in the U.K. by 2026.” Associate Professor of Strategy and Entrepreneurship at the UCL School of Management Joost Rietveld, who has also been a consultant for Microsoft during its acquisition process, challenges the notion that cloud gaming as a whole is a single market.
Instead, Rietveld splits it into four categories, placing Xbox Game Pass into a category called “cloud gaming as a feature,” which is when it’s “offered as part of a consumer-facing distribution platform” or “included within a bigger bundle of services provided by the platformer.” Under Rietveld’s view, services like Nvidia GeForce Now, Ubitius, and EE -- all of whom Microsoft has made individual deals to bring Activision Blizzard and Xbox Game Studios titles to -- fall into different categories and thus shouldn’t be considered or directly compared to Xbox Game Pass. No matter how they’re categorized now, the real question mark looming over the technology is its future growth, according to Omdia Senior Principal Games Analyst Steve Bailey.
“Will it remain a niche additional service or become the gaming platform of the future?” Bailey asks in his statement to Digital Trends. “Our projection is that cloud gaming is growing rapidly (revenue should more than double by 2026), but it’s still a long way from taking over the games market, so it remains arguable either way.”
“Arguable” stands out as the keyword to me here. Like any emergent technology, we’re heavily debating the positives and negatives of cloud gaming, specifically through the lens of this acquisition. But what exactly is it that the CMA sees in Microsoft that worries them?
The CMA’s problem with Microsoft
“The CMA’s argument is not that acquiring Activision Blizzard would allow Microsoft to dominate the console market as a whole, where Sony and Nintendo have strong positions relative to Xbox, but only that it would help it to achieve a dominant position in cloud gaming specifically,” Bailey tells Digital Trends. “Microsoft and Activision Blizzard will likely argue that this is disproportionate, given the relatively small scale of the cloud gaming market.”

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Microsoft’s Activision Blizzard acquisition blocked in the U.K. over cloud concerns
microsoft activision blizzard deal questions overwatch 2 lucio

The U.K.'s Competition and Markets Authority (CMA) has blocked Microsoft's attempt to acquire Activision Blizzard because of its potential negative impact on cloud gaming. 
Since January 2022, Xbox parent company Microsoft has been trying to acquire Activision Blizzard, the video game publisher behind franchises like Call of Duty, Diablo, Warcraft, and Overwatch. The companies have run into lots of regulatory hurdles, though, especially from the CMA and FTC, the latter of which is currently suing Microsoft. While it seemed like the CMA was inching towards approving the deal, the U.K. regulator ultimately decided to block it due to its potential impact on the fledgling cloud gaming market.

"Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service," a press release from the CMA explains. " Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities."
Over the past couple of months, Microsoft has attempted to ease these cloud gaming concerns by making deals with companies like Nvidia and EE. The CMA did not think these remedies were enough, though, saying that Microsoft's efforts didn't account for enough potential business models, cloud gaming services that don't use Windows, and how the deal could take "the dynamism and creativity of competition" away from the U.K.'s cloud gaming market.
Obviously, Activision Blizzard and Microsoft aren't too happy about this decision. Activision Blizzard directly attacks the CMA in a statement provided to Digital Trends, saying that the "report contradicts the ambitions of the U.K. to become an attractive country to build technology businesses," before calling the country's economic prospects "dire" and threatening that it will reconsider its plans for growth in that country. 
Microsoft's statement from Vice Chair and President Brad Smith is a bit more measured, saying that Microsoft is "fully committed to this acquisition and will appeal." Citing the deals the company has already made to bring Call of Duty to more platforms, Smith says that the decision shows "a flawed understanding of this market and the way the relevant cloud technology actually works."
https://twitter.com/BradSmi/status/1651182266406584320
Microsoft has a lot of work cut out for itself if it still wants to force this deal through after pressure from the FTC and CMA. As the appeals process could take up to nine months or more, it seems unlikely that the acquisition meets its original June 2023 deadline; it's probable we'll be following this fight to acquire Activision Blizzard for the rest of the year. 

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