Microsoft plays a dangerous game

technology today is moving at a breakneck pace, with innovation travelling faster than the speed at which it can reach the masses. but the powers that be (read Big Tech) appear to be adamant they can succeed in this grand game of ‘build it and they will come’. Facebook’s pivot late last year to Meta, signalling its switch to moving the world to the metaverse is testament to this fact. that move has its peers scrambling to ensure they don’t get left behind in this potential new reality. not the least of which is Microsoft that has now agreed to buy out gaming studio Activision Blizzard in an all-cash $68.7 billion deal.

if the move goes through, this will be the Windows OS-maker’s largest ever acquisition. but will it be its best?

establishing dominance

the narrative here is pretty straightforward, and one that most investors are probably clued into by now. when the pandemic struck at the beginning of 2020, it left a majority of the world’s population grounded at home for a long time. people got bored and started looking for ways to stay entertained, anything to distract them from the horrific scenes playing out in the world. streaming got a boost, and so did gaming, which is a larger industry than movies and music combined.

naturally, Big Tech took note, and the likes of Netflix and Amazon also began diving into the sector. as an incumbent major in the sector, thanks to its XBox consoles and associated ecosystem, Microsoft came under pressure to fight off this emerging competition. thus began the spree of acquisitions of successful gaming studios which appeared to have the secret formula.

red flags

however, Microsoft’s choice of studio might end up giving it some headaches. despite its stellar portfolio, Activision’s most recent stint in the headlines has been due to sexual harrassment lawsuits and other cultural shortcomings which saw mass walkouts by employees and left it a black sheep within the industry. even a rebranding, if there is one, may not be sufficient to clear out the bad vibes. 

meanwhile, with the world no longer largely in a state of lockdown, one might expect people to go out and socialise more, or have to report in to work, or otherwise find their gaming time cut. so the industry might not grow as fast as the projections from the past two years indicate. then, of course, there’s the possibility that the metaverse play fails to take off at all, as an idea whose time has not yet come.

even if the stars somehow align for Microsoft on this expensive bet, there’s the possibility of regulators turning the lights out on the deal for being monopolistic. the news is no doubt one that will bring cheer to gamers, who will now have access to an unmatched catalogue, but investors might do well not to get too carried away.