Microsoft buys Activision Blizzard for $68.7 billion, what does this mean for China’s gaming industry?

Microsoft, the American tech giant, is to buy the maker of the Call of Duty series in an all-cash deal worth $68.7 billion. This would be the largest-ever acquisition in gaming history, surpassing the company’s previous record of the $7.5 billion deal, to take over another influential gaming company Bethesda just a year ago.

Although Activision has been experiencing a downward turn in recent years, with its internal culture believed to be the cause, the video game maker is still deemed to be a winner in its niche with other hit games including Warcraft and Overwatch making global waves.

The latest move by Microsoft could actually be good timing to take the ownership of this potential equity, and makes Xbox, a video game brand owned by Microsoft the third-biggest gaming company by revenue, just following China’s Tencent and Japan’s Sony, developer of PlayStation game consoles.

Importantly, by owning the studio that makes some of the world’s largest games, Microsoft will be able to add more demand for their services and make the franchises Xbox exclusive, adding a customer base to their consoles whilst removing it from their competitors.

In response to the news,  it is reported that shares of the Japanese tech giant Sony have slid down in Tokyo trade due to the potential Microsoft buyout. The two Chinese game makers Tencent and NetEase, which are listed on the Hong Kong Stock Exchange, seem to be less affected.

In fact, the two companies had already had a layout with two of Activision Blizzard’s most important IPs (Intellectual Properties). Tencent used to hold a 5% stake in Activision Blizzard, as according to the company’s annual report in 2016. The Chinese video developer was also an agent operator of Call of Duty in the Chinese market, while NetEase was an agency for Warcraft in China.

Now becoming the new owner of these popular game IPs, Microsoft is expected to enter a fiercer rivalry with its Chinese counterparts. However, the company is also expected to develop a strategic partnership with the latter, given that China is one of the biggest gaming markets in the world. Domestic game makers are doubling down efforts in developing new products that cater to China’s gaming consumers and by allying itself with the biggest game designers in China, Microsoft is able to better penetrate the lucrative market.

The acquisition is expected to be finalised in 2023, with the deal’s anti-competitive effects to be evaluated. It is not yet clear if Activision Blizzard games will soon become exclusive to Xbox, as at the moment they are available on both Microsoft and Sony consoles.

The biggest-ever buyout by Microsoft is also believed to stir an acquisition wave in the gaming industry, including that in China, pushing up the market value of the country’s game companies. However, it would still be interesting to see if the wave would finally come, considering the Chinese government has been beefing up efforts in cracking down any violations of its anti-monopoly laws on top of the stiffer control of the country’s tech industry.

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