How does it benefit the industry though? You said Microsoft would likely pull out of gaming if the deal falls through. That implies that they have zero intent to compete creatively.
When the Wii U and PS3 had poor launches, Nintendo and Sony innovated on hardware and software, respectively, and their gaming divisions were better for it. Microsoft hasn't innovated at all, and have instead decided to compete on value (Game Pass). That does nothing to push the medium forward.
I didn't say it was likely that they pull out. It's so fascinating how people read things and make their own conclusions that aren't justified from what they read.
I said Spencer is likely to get fired, not that Microsoft is likely to pull out of gaming. Is it a possibility? Absolutely, one confirmed by Spencer himself.
But no, I don't think you're going to see much innovation from Microsoft in gaming if this deal falls through. For Microsoft it comes down to opportunity costs. The sell for the Microsoft board would have been, hey we can turn GamePass into the Netflix of gaming on console and PC. To give you some context, Netflix has an annual net income of about 5 billion dollars per year the last couple of years.
The goal for buying Activision is to say, this will cement GamePass and xCloud as future revenue drivers and let Microsoft compete against multiple competitors in the space.
Activision can generate nearly 3 billion in net income in a year, if combined with GamePass being successful this pushes you to maybe 5-7 billion a year in annual income not even including the rest of what Xbox makes. So long term you think you can pay off the investment in 10-15 years, but end up with the Netflix of gaming.
That's the sell.
What Microsoft doesn't want is an entrenched cyclical battle with Sony over 3rd party royalties and console sales. That's not their bag and I think everyone needs to recognize that. Do they want the XSX/S to outsell the PS5? Of course, but that's not where their focus is. They just need a platform to drive GamePass.
If you have 25 million subscribers paying 10 dollars a month (yeah yeah, I know they're not all paying, but let's keep this academic) 250 million dollars a month 3 billion a year (in revenue). How much is that in net income? We don't know, but let's say it costs a billion dollars to run it. That would put them at 2 billion in profit a year. It wouldn't be a bad start, but GamePass needs something to sustain it on an annual bases. CoD fans would be a great way to do that.
I'll end things in saying, quite a few people would say that GamePass is in itself just as much an innovation as the Switch or the Wii. I'm not sure if Sony really innovated between PS3 and PS4, rather they kind of went back to square one.
