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Wall Street was Betting That Microsoft-Activision Deal Will Fail

Fredrik

Gold Member
They transferred a huge amount of cash (which by itself loses 10% per year due to inflation) into an asset that makes money. Even if Activision Blizzard made zero profits from this day on, it would have been a better investment than holding onto $70 billion cash that will be half as valuable in five years. So I don't think they need to waste any thoughts on how to "recoup" the money.
Hmm, clever.
Last year it was like 3bn in profits (will need to double check when I get to a laptop), the Activision and Blizzard have issues in the short term imo but its not unrecoverable. King grew 10% YoY last quarter.

Nothing is certain that's true for everything though.



Need to stop thinking of it in this way, they don't need to recoup the money cause that cash on hand has been converted into asset, which if they wanted to they could sell on. The real question is what makes the most ROI? leaving the cash in a bank (in this inflationary environment) , buying ABK or spending the money on other companies.


That's a very good question. I think you would need to first define 'better', better in terms of generating a profit and causing a shift in user behaviour or better in terms of games quality.

I don't expect any big studios to be bought by MS after this. I think they will have to work via publishing deals or exclusivity deals.
With ”better” I mean more than owning multiplat Call of Duty, WoW and Diablo. Might bring in money over time, like Minecraft, but for the purpose of growing their platforms it feels like an expensive nothing-burger.
 

DukeNukem00

Banned
After Activision, the remaining interesting ones are Take Two and Epic (and Valve).
If Sony starts snagging Japanese publishers, I could see MS acquiring TTWO. Both Epic and Valve will be difficult to acquire, so there is no way to predict what will happen with them.

Epic and Valve are private companies, not public ones. Its not possible for anyone to buy them. Its not difficult, its impossible. Because i doubt Tim or Gabe will wake up one morning and say today im just gonna sell my company for no reason
 

reksveks

Member
After Activision, the remaining interesting ones are Take Two and Epic (and Valve).
If Sony starts snagging Japanese publishers, I could see MS acquiring TTWO. Both Epic and Valve will be difficult to acquire, so there is no way to predict what will happen with them.
Taking Epic and Valve off the table personally cause it would be an easy argument for the FTC /DOJ.

I think take2 will merge/acquire another publisher beforehand and just price/scale up out of the market.

I think Sony will do 1 big Japanese publishers. I hear that the Japanese regulators are pretty strict on anti-trust within their markets but that's obviously changeable.
 

Goalus

Member
Epic and Valve are private companies, not public ones. Its not possible for anyone to buy them. Its not difficult, its impossible. Because i doubt Tim or Gabe will wake up one morning and say today im just gonna sell my company for no reason
It's not impossible. As you said, it will require the owners wanting to sell.
Tim Epic was willing to sell half the company to Tencent. So it is indeed possible, but as I said, it is not easy to predict what will happen when.
 

reksveks

Member
With ”better” I mean more than owning multiplat Call of Duty, WoW and Diablo. Might bring in money over time, like Minecraft, but for the purpose of growing their platforms it feels like an expensive nothing-burger.
I think you might underestimating the power of 'free' (obviously you are paying a gamepass sub fee) to grow their platforms. Microsoft thinks the money is in the storefront and increases MAU is the key metric.
 

Chukhopops

Member
Hmm, clever.

With ”better” I mean more than owning multiplat Call of Duty, WoW and Diablo. Might bring in money over time, like Minecraft, but for the purpose of growing their platforms it feels like an expensive nothing-burger.
They are growing their platform by +/- doubling the profit of their gaming division mechanically, buying a gigantic mobile publisher and getting leverage on their competitors who are also buying publishers. In terms of value for money it’s ridiculous.

Also there’s nothing indicating Blizzard games will remain multiplat on consoles.
 

Goalus

Member
I think take2 will merge/acquire another publisher beforehand and just price/scale up out of the market.
That is possible (likely even), but with the markets currently tanking, TTWO might be available for cheap during the next twelve months. The cash the big companies are holding remains at the same nominal value though, so if some big company wants to buy them, I could see them doing that during the upcoming twelve months.
 
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Fredrik

Gold Member
I think you might underestimating the power of 'free' (obviously you are paying a gamepass sub fee) to grow their platforms. Microsoft thinks the money is in the storefront and increases MAU is the key metric.
Does it work though? Are the figures showing that their strategy is working? I mean I play a ton of games through Gamepass (which I got cheap $5/month) but I don’t actually buy anything, last game I bought on Xbox was Assassin’s Creed Valhalla on Xbox One in 2020 iirc.
Also there’s nothing indicating Blizzard games will remain multiplat on consoles.
Is the multiplat talk just about Call of Duty? I haven’t updated myself on Diablo IV, is that Xbox and PC exclusive?
 

The_Mike

Member
Okay Jason what's your Gaf alias! There's too many guesses.
Dedicated,even in death
sad wilfred mott GIF
 

reksveks

Member
Does it work though? Are the figures showing that their strategy is working? I mean I play a ton of games through Gamepass (which I got cheap $5/month) but I don’t actually buy anything, last game I bought on Xbox was Assassin’s Creed Valhalla on Xbox One in 2020 iirc.
I will double check the non-hw revenue growth when I get to my PC.
 

Chukhopops

Member
Does it work though? Are the figures showing that their strategy is working? I mean I play a ton of games through Gamepass (which I got cheap $5/month) but I don’t actually buy anything, last game I bought on Xbox was Assassin’s Creed Valhalla on Xbox One in 2020 iirc.

Is the multiplat talk just about Call of Duty? I haven’t updated myself on Diablo IV, is that Xbox and PC exclusive?
MS gaming revenue has increased by +/- 75% since the launch of GP, from 8bn USD to 14bn USD (and that’s for the 2020-2021 period) after being basically flat for 3 years. Sure there were other factors but it seems their strategy is paying off overall.

For the multiplat thing afaik it was only about CoD because of marketing commitments.
 

MonarchJT

Banned
Epic and Valve are private companies, not public ones. Its not possible for anyone to buy them. Its not difficult, its impossible. Because i doubt Tim or Gabe will wake up one morning and say today im just gonna sell my company for no reason
before or later valve will sell or trasform into a public Company. Paradoxically, it is easier to buy a private company than a public one. In both cases the candidate par excellence is Microsoft also for the rapprochement that Gabe is having towards the Xbox division...also Microsoft is the owner of the os of every gaming PC....Windows. Ms will never (n e v e r) allow Valve with its hundreds millions of users ends up in the hands of a direct rival, since it is now clear that Nadella sees in the gaming world a market in which the entire company must invest with large capital (see 70b for Activision). There is also to keep in mind that Valve is worth more than 10b and would not sell for less than 15/20 ... few companies can afford to buy it. Having a store like Valve is Ms wet dream.
 
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DukeNukem00

Banned
before or later valve will sell or trasform into a public Company. Paradoxically, it is easier to buy a private company than a public one. In both cases the candidate par excellence is Microsoft (also for the rapprochement that Gabe is having towards the Xbox division). It will never (n e v e r) allow Valve with its hundreds millions of users ends up in the hands of a direct rival. There is also to keep in mind that Valve is worth more than 10b and would not sell for less than 15/20 ... few companies can afford to buy it. Having a store like Valve is Ms wet dream.


Doubtful. Why would it ? Gabe will leave it to his kids i would imagine. Why sell a one of a kind company like Valve that makes billions every year, guaranteed ? For other billions, from Microsoft ?
 

Zeroing

Gold Member
Does it work though? Are the figures showing that their strategy is working? I mean I play a ton of games through Gamepass (which I got cheap $5/month) but I don’t actually buy anything, last game I bought on Xbox was Assassin’s Creed Valhalla on Xbox One in 2020 iirc.
It is the power of perception. They do not care if people buy their games or games from other studios. The bigger the service grow the bigger leverage they will have in making deals to put games on their platform. Trapping people in gamepass is their goal, because people buying games or not, buying consoles or not... Gamepass is guarantied revenue.
MS gaming revenue has increased by +/- 75% since the launch of GP, from 8bn USD to 14bn USD (and that’s for the 2020-2021 period) after being basically flat for 3 years. Sure there were other factors but it seems their strategy is paying off overall.

For the multiplat thing afaik it was only about CoD because of marketing commitments.
GamePass was already 1 years old if I am not mistaken, what you mean is when they launched the marketing buzz. Also of course the revenue would grow after the launch of a console. i still do not think this is related to gamepass at all.
 

reksveks

Member
MS gaming revenue has increased by +/- 75% since the launch of GP, from 8bn USD to 14bn USD (and that’s for the 2020-2021 period) after being basically flat for 3 years. Sure there were other factors but it seems their strategy is paying off overall.

For the multiplat thing afaik it was only about CoD because of marketing commitments.
Personally would look at software and services, hardware revenue gets very easily skewed by console releases.

GamePass was already 1 years old if I am not mistaken, what you mean is when they launched the marketing buzz. Also of course the revenue would grow after the launch of a console. i still do not think this is related to gamepass at all.
Yeah, we aren't really going to be able to split out GP and Xbox having a better hw offering imo.
 

Chukhopops

Member
It is the power of perception. They do not care if people buy their games or games from other studios. The bigger the service grow the bigger leverage they will have in making deals to put games on their platform. Trapping people in gamepass is their goal, because people buying games or not, buying consoles or not... Gamepass is guarantied revenue.

GamePass was already 1 years old if I am not mistaken, what you mean is when they launched the marketing buzz. Also of course the revenue would grow after the launch of a console. i still do not think this is related to gamepass at all.
GamePass launch: June 1st 2017
First period where MS showed growth after being flat for 3 years: 2017-2018

So it wasn’t a year old at all. Of course there are other factors but it was part of the GamePass prophecies that revenue would drop because people would stop buying games… and like the other prophecies the opposite happened.
 

Fredrik

Gold Member
MS gaming revenue has increased by +/- 75% since the launch of GP, from 8bn USD to 14bn USD (and that’s for the 2020-2021 period) after being basically flat for 3 years. Sure there were other factors but it seems their strategy is paying off overall.

For the multiplat thing afaik it was only about CoD because of marketing commitments.
Interesting. Well if they can keep adding great games and add Activision Blizzard games on top of that without increasing the price it should definitely pull in more people.
Not sure how big Diablo is on consoles but if IV is Xbox/PC exclusive it could pull in some people too.
In the end I still think they’re paying too much, could have 300 Insomniac studios for that money.
 

Zeroing

Gold Member
GamePass launch: June 1st 2017
First period where MS showed growth after being flat for 3 years: 2017-2018

So it wasn’t a year old at all. Of course there are other factors but it was part of the GamePass prophecies that revenue would drop because people would stop buying games… and like the other prophecies the opposite happened.
I am so not invested in all that... I did not even knew it was that old.
 
Not sure what people are clowing Jason here for. Buffet IS betting against wider sentiment. That's what he does and why he's been able to beat the market for the past 50 years
 

Goalus

Member
Not sure what people are clowing Jason here for. Buffet IS betting against wider sentiment. That's what he does and why he's been able to beat the market for the past 50 years
Not sure this is true.
If the wieder sentiment was against a successful completion of the deal, Activision's share price would be much lower.
 

reksveks

Member
Not sure what people are clowing Jason here for. Buffet IS betting against wider sentiment. That's what he does and why he's been able to beat the market for the past 50 years
I am okay with Jason's article personally, there is some people whom don't believe it will go through and some people who think the ROI isn't worth it yet. I just think it will go through for a couple of reasons:
- I don't think the case is particularly strong in any one area
- I don't think MS will drop it
- I think MS will be happy to make some concessions, the red line on that front probably is if the FTC does something weird like say ABK games can't be on a subscription service.

I will double check the non-hw revenue growth when I get to my PC.
Fredrik Fredrik table below for YoY growth.
Sony JPYSony USDXboxNPD USUKDE
2017​
71%​
63%​
10%​
No DataNo Data
2018​
42%​
44%​
32%​
No DataNo Data
2019​
-5%​
-3%​
-2%​
No DataNo Data
2020​
27%​
31%​
33%​
No Data
18%​
2021​
0%​
-3%​
9%​
7%​
-10%​
-9% if full game, 19% if including in-app which I think includes mobile

Note for the UK, only using SW Digital Console Sales, SW Pre-owned, SW Boxed
Note for the US includes mobile but I can't get rid of that.

Sony JPY is using the JPY values
Sony USD is using the USD values if we used Sony's USD conversion rates in their reports
Sony using Network Services and Software,
Xbox using Software and Content or whatever the name is.
 
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I am okay with Jason's article personally, there is some people whom don't believe it will go through and some people who think the ROI isn't worth it yet. I just think it will go through for a couple of reasons:
- I don't think the case is particularly strong in any one area
- I don't think MS will drop it
- I think MS will be happy to make some concessions, the red line on that front probably is if the FTC does something weird like say ABK games can't be on a subscription service.

I think all that's fair. I have no idea whether it'll go through or not. Any reason it doesn't go through will probably be due to the political landscape we're in really.

I don't think people should get hung up on market sentiment or what wall street thinks either. They've been wrong plenty of times before. I have positions that are betting against them too
 
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yurinka

Member
They transferred a huge amount of cash (which by itself loses 10% per year due to inflation) into an asset that makes money. Even if Activision Blizzard made zero profits from this day on, it would have been a better investment than holding onto $70 billion cash that will be half as valuable in five years. So I don't think they need to waste any thoughts on how to "recoup" the money.
Excellent point.

The acquisition itself would provide them many benefits by improving their revenue and profits, adding way more value due to prestigious teams, brands and games, it would secure a lot of content for Xbox and GP and these IPs could be milked in many addititonal areas like movies, tv shows, comics, toys, books and so on. Plus also in terms of PR & marketing they'd get big names to fill roadmaps of releases and events. The acquisition provides them many positive things directly and indirectly.

But other than them I didn't realize the one you mention: nowadays this money is better in something that makes money that sitting in the bank. Because inflation, but also because there's a huge upcoming finantial crysis and at the same time USA is losing its worldwide finantial hegemony, the economy is moving to a multipolar world. This means the dollar value will go down, so the cash in the bank will loose value, so it's better to invest it in safe stuff.

And inside gaming, being a platform holder the best investment they can do (other than to buy the market leader platform holders, which I assume aren't for sale) is to buy the biggest 3rd party publisher.

Epic and Valve are private companies, not public ones. Its not possible for anyone to buy them. Its not difficult, its impossible. Because i doubt Tim or Gabe will wake up one morning and say today im just gonna sell my company for no reason
It's possible to buy private companies like Epic or Valve. Like in public companies if the stock holder wants to sell and other people wants to buy and thinks its price is ok, can be bought.

This kind of companies have other companies interested to buy them and with enough money ready to buy them. In the case of ABK, Bungie and so on their sttockholders wanted to sell. Tim or Gaben as of now don't want to sell.

If companies like Epic or Valve aren't sold isn't because they are private. It's because they owners don't want to sell. But who knows, it may change.

Maybe some year Gabe (60 years old) or Tim (52 y.o.) may want to quit from gaming and retire, and to earn even more money for their retirement and their family. Or may decide that their growth is somewhat stuck and someone of the ones who want to buy them would help them grow in certain areas where they want to grow but they can't do it by themselves (because they have access to more money, because they are gate keepers of some market they need, because they are the best partners to enter or grow in certain market, because they have some tech or data that they don't have acess to and wouldn't be able to develop it in many years, because would provide them some content they need/would welcome for their platform, etc).
 
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ManaByte

Gold Member
After listening to hogue law and understanding his points, schreier is absolutely wrong for what he is doing here. Embarrassing.

Wait you're telling me a guy with a massive grudge for being blacklisted by Bethesda is trying to sabotage MS's purchase of Activision?
 

64bitmodels

Member
I've seen people arguing that MS owns too much power/influence outside of gaming and that gaming would be another step were they are in everything. I kinda understand, but I dunno, let them fight, I do not care.
TBF, does MS really have that much influence period?
>Desktop computers are dead to most people besides gamers and creators, and the latter usually defaults to macs, not windows
> Nearly all of the ultra mainstream web is controlled by google, amazon, facebook, and twitter. But not microsoft. MS will most definitely get surpassed by Google and Amazon in the future.
> Apple is richer than them and sells way more products
The only influence they have really is in schools and offices, and even then for the former google's taking that sector with their chromebooks, and the latter also has a significant mac OS presence
the fact MS is *still* this rich to this day despite every other rich company being more well known is absurd to me, really. And it's also why that influence argument is BS.
 

12Dannu123

Member
TBF, does MS really have that much influence period?
>Desktop computers are dead to most people besides gamers and creators, and the latter usually defaults to macs, not windows
> Nearly all of the ultra mainstream web is controlled by google, amazon, facebook, and twitter. But not microsoft. MS will most definitely get surpassed by Google and Amazon in the future.
> Apple is richer than them and sells way more products
The only influence they have really is in schools and offices, and even then for the former google's taking that sector with their chromebooks, and the latter also has a significant mac OS presence
the fact MS is *still* this rich to this day despite every other rich company being more well known is absurd to me, really. And it's also why that influence argument is BS.

Clearly you have no idea what you're talking about. Microsoft has massive influence in the Business space. I agree consumer influence has decreased, but in the Cloud gaming space. Microsoft the best positioned to be a dominant player in that space as they control the whole stack, something no other company does.

If you control the whole stack, you're going to win in the long term.
 
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12Dannu123

Member
how am i wrong though?
All your points are related to consumer markets. MS has always been a B2B orientated company. MS will often release consumer versions of those B2B products afterwards. In the B2B space they have a lot of influence (Almost a monopoly in the productivity software space) same with the gaming space. It's why they're worth more than Google and Amazon.

As I have mentioned before, because MS controls the whole stack from Cloud, Developer tools, Platforms and Content along with big financial backing, Microsoft is best positioned to be a dominant player in the gaming industry as it expands and embrace the cloud.

The only area where they don't dominate in the game stack space is the game engine.
 
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Shmunter

Gold Member
I agree with Pachter (I am kinda scared about that)
Wow the pro insight by Pachter. Takes 2 seconds to check the stock sentiment on any stock tracker. In saying that, there is an appreciable uptick in last 2 days, was all south before then.
 

reksveks

Member
Wow the pro insight by Pachter. Takes 2 seconds to check the stock sentiment on any stock tracker. In saying that, there is an appreciable uptick in last 2 days, was all south before then.
I didn't say that it was particularly interesting or a unique insight.

I think the only concession too far for MS would be anything to do with GP aka unable to put games on GP.

Yeah, the stock price did give it away that there are a lot of hesitant investors out there.
 

GHG

Member
Wow the pro insight by Pachter. Takes 2 seconds to check the stock sentiment on any stock tracker. In saying that, there is an appreciable uptick in last 2 days, was all south before then.

*1 day

But that's the "buffet buy" effect on retail investors. More shares traded yesterday than there had been in any of the previous ~30 days of trading.

People will just blindly follow whatever he does without realising they get the information long after he's already made the trade. Let me put it this way, he won't be telling people when he's selling until long after either. And believe me if the deal were to fall through he would catch wind of it long beforehand and get out of the way.

But overall it's not moved the needle yet in terms of the overall sentiment, it's right back to where it was trading at the start of last week.
 
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Hendrick's

Member
I didn't say that it was particularly interesting or a unique insight.

I think the only concession too far for MS would be anything to do with GP aka unable to put games on GP.

Yeah, the stock price did give it away that there are a lot of hesitant investors out there.
The concessions will be around employee rights and will have little to do with where games release. I just don't see why the FTC would care about that.
 

reksveks

Member
The concessions will be around employee rights and will have little to do with where games release. I just don't see why the FTC would care about that.
I think that might be the likely case as well but who knows with the FTC. I think there might be a concession around Call of Duty releasing on PS consoles for a set time period which Xbox would very happily take.
 

Hendrick's

Member
I think that might be the likely case as well but who knows with the FTC. I think there might be a concession around Call of Duty releasing on PS consoles for a set time period which Xbox would very happily take.
That would be unprecedented levels of interference over a video game of all things. That would be like making Disney share their content with other streaming services. Being entertainment and non-essential, I really don't see it. That said, I think it is likely MS will do this of their own accord.
 

darrylgorn

Member
I love how this is supposed to make MS a monopoly and yet we don't even know what percentage of the market Activision currently holds.

Edit: Ok, here we go:

According to Newzoo, Microsoft’s gaming market share was 6.5% in 2020 and adding Activision would have taken it to 10.7%.



So much for a monopoly.
 
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reksveks

Member
Means nothing but just kinda fun

 
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