Microsoft’s

Acquisition of
Activision Blizzard
By: Abiel, Jason, Leonardo, and Jackson
 Abiel

Introduction:

Microsoft, founded in 1975 with the purpose to empower both organizations and people.
They are able to achieve more through making technology which transforms how people
communicate and work. Blizzard, a gaming company with the mission to deliver unrivaled
gaming experiences for the world to enjoy. Microsoft acquired the company Activision
Blizzard on October 13, 2023. This is after Blizzard faced a very complicated and
controversial year which caused severe backlash. The controversies and lawsuits led to
nearly $8 billion dollars being lost from the company as well as losing their credible
reputation. Microsoft decided it was the perfect time for proposing an offer and were
able to boost their presence in the gaming industry. This made them the world’s third
largest video game company and granted ownership of multiple popular franchises like
Call of Duty.
Quantitative Research (Leo)

Financial Impact: The $68.7 billion all-cash transaction significantly utilized Microsoft’s cash reserves,
which stood at $137.7 billion in November 2021. This expenditure reflects Microsoft’s commitment to
expanding its gaming division and diversifying its revenue streams.

Revenue Growth: Post-acquisition, Microsoft’s gaming revenue experienced substantial growth. In the
quarter ending December 2023, the company’s gaming segment revenue increased by 19%, reaching
$16.89 billion. This surge was largely attributed to the integration of Activision Blizzard’s titles into
Microsoft’s portfolio.

Market Share Expansion: The acquisition positioned Microsoft as the world’s third-largest gaming
company by revenue, enhancing its competitive stance against industry leaders such as Sony and
Tencent.
Qualitative Research (Leo)

Strategic Synergies: The merger aimed to leverage Activision Blizzard’s strong game franchises to
enhance Microsoft’s Game Pass subscription service, potentially increasing subscriber numbers and
engagement. This strategy aligns with Microsoft’s vision of expanding its gaming ecosystem across
multiple platforms, including cloud gaming.

Cultural Integration Challenges: Activision Blizzard faced internal challenges, including allegations of
workplace misconduct and discrimination. Microsoft’s leadership emphasized the importance of
addressing these issues to foster a more inclusive and productive work environment.

Regulatory Considerations: The acquisition underwent rigorous scrutiny from global regulators
concerned about potential anti-competitive effects. Microsoft made commitments to maintain the
availability of Activision Blizzard’s games on various platforms to alleviate these concerns.
 Abiel

How is it external growth?

Microsoft’s acquisition of Activision Blizzard is external growth through growing their
company using outside resources and capabilities. Blizzard has tens of millions of
monthly players, and this generates them income through each sale of the games and
microtransactions. In fact “in 2022 Quarter 4, 45 million users were accessing Blizzard
Entertainment’s content” (Statista, Line 20). Blizzard as a company makes billions of
dollars each quarter and maintain a steady amount of consumers. In activision news it
states, “Activision Blizzard’s net revenues presented in accordance with GAAP were
$2.21 billion, as compared with $1.64 billion for the second quarter of 2022.” (Investor,
2nd Paragraph). Microsoft’s purchase might seem like an immense amount, However
through use of their own assets they will be able to further grow activision and generate
more revenue. Furthermore, it is an acquisition where one company takes over another
and in this case its Microsoft taking over Blizzard. If this deal was internal growth, then
the business would use its own resources to develop and expand their company.
 Microsoft’s acquisition of Activision Blizzard according to
Jason
Ansoff’s Matrix

Ansoff’s Matrix is an effective tool used to classify the growth of a business based on the deal they
make. It further helps to assess the risk levels of a decision, with diversification seen in red above
with the highest risk, and market penetration as the safest type of business venture. It is possible to
separate the intentions of a business’s decisions using Ansoff’s Matrix, as seen in the above image.
 Microsoft’s acquisition of Activision Blizzard according to
Jason
Ansoff’s Matrix

Microsoft’s development strategy is focused on product development. The gaming industry is already a well-established
market, and while Microsoft already owned some of it, their acquisition of Activision Blizzard increased their stake in the
industry. With this acquisition, Microsoft has obtained several world-famous gaming franchises, such as Call of Duty, World
of Warcraft, and Overwatch. Because of this acquisition, many of these franchises are now accessible on Microsoft’s gaming
console, Xbox. Xbox had already established a "Gamepass," a monthly subscription that millions of people follow to have
access to available games. Since the acquisition, Xbox has placed several of the aforementioned franchises on their
Gamepass, introducing new products to an already existing market. This further expands Microsoft’s control of the
videogame market, as they now exclusively own these renowned franchises, which provides them with a competitive edge
over the rest of the industry. These acquisitions have helped boost Microsoft’s relevancy to the gaming industry, as, when
sorting by revenue, Microsoft is now the third largest video game company in the world. Microsoft’s expanding role in the
videogame market further weakens competitors such as Sony, as the company’s success drives users away from Sony’s
console, the Playstation, and towards the Xbox. These new franchises increased the demand for Gamepass and thus boosted
Microsoft’s relevancy in the gaming industry. This strategy has proven successful, as, in 2024, Xbox saw a year-to-year
revenue increase of 50%. Furthermore, it is estimated that 44% of this increase is due to the new games available to
Gamepass subscribers. This also allows for future profit boosts, as Microsoft will release sequels to the previously
mentioned games, grossing even more than in recent years because the initial profits will now go to Microsoft. The
expansion of owned franchises is not without risks, however, as a poorly received game produced by Activision Blizzard
could damage Microsoft’s brand as a gaming company and reduce future revenue.
 Jackson
Relating to the concept of change

Microsoft’s acquisition of Activision Blizzard (Blizzard) relates directly to the

concept of change. As the gaming industry shifts with new tech being
introduced, changing consumer behavior, and new competition, Microsoft is
adjusting by gaining control of popular franchises like Call of Duty, Overwatch,
and World of Warcraft. This move vastly strengthens Microsoft's position within
the industry and sets it up for success in the up-and-coming subscription and
cloud gaming markets. This acquisition allows Microsoft to challenge
powerhouses in the industry, such as Sony and Nintendo, more effectively. The
acquisition highlights Microsoft's shift towards digital content, reducing its
reliance on external developers to fill their consoles with games. While
Microsoft's acquisition will be a challenge due to having to align Blizzard's
operations and culture with their own, it will be well worth it due to the strength
of the franchises owned by Blizzard. This acquisition shows how businesses have
to adapt to external pressures and changing markets and leverage new
opportunities to stay competitive and have an edge.
 Conclusion (Leo and Jackson)

Microsoft’s acquisition of Activision Blizzard can be seen as a

strategic marriage rather than a tragedy. This union leverages
the strengths of both companies, with Microsoft expanding its
influence in the gaming industry through access to popular
franchises like Call of Duty and World of Warcraft, while
providing stability and resources for Blizzard to overcome
recent controversies. This acquisition also allows microsoft to
have more resources for their vision of building the
foundations for the metaverse, further solidifying their
presence in next generation digital platforms and consoles.
Despite the challenges of integrating corporate cultures, this
acquisition empowers Microsoft to dominate the gaming
market and evolve toward subscription and cloud-based
models. Thus, this acquisition represents a successful alliance,
positioning both companies for mutual growth and
reinforcing Microsoft’s competitive edge.
Citations

CFI Team. “External Growth.” Corporate Finance Institute,

corporatefinanceinstitute.com/resources/valuation/external-growth/.

Activision Blizzard. “Activision Blizzard | Activision Blizzard Announces Second Quarter 2023
Financial Results.” Activision Blizzard, 2023,
investor.activision.com/news-releases/news-release-details/activision-blizzard-announces-s
econd-quarter-2023-financial.
“Blizzard Number of Monthly Active Users 2021.” Statista,
www.statista.com/statistics/1234255/blizzard-quarterly-mau/
“Activision Blizzard generated $1.68 billion for Microsoft in Q4, with Xbox hardware revenue
down 42% | Game World Observer.” Game World Observer, 30 July 2024,
gameworldobserver.com/2024/07/31/xbox-revenue-activision-blizzard-impact-q4-fy24
Yahoo is part of the Yahoo family of brands.
finance.yahoo.com/news/microsoft-is-now-a-gaming-juggernaut-193833039.html