Acquisition of Activision Blizzard by Microsoft

Based on Wikipedia: Acquisition of Activision Blizzard by Microsoft

The Deal That Almost Didn't Happen

Seventy-five billion dollars. That's what Microsoft ultimately paid to acquire Activision Blizzard in October 2023, making it the largest video game acquisition in history. But here's the thing that makes this story fascinating: for nearly two years, it looked like the deal might collapse entirely.

This wasn't a simple handshake between two corporate giants. It was a sprawling international drama involving regulators on three continents, a lawsuit about workplace harassment, courtroom battles with federal agencies, and a tech rivalry that dates back decades. Along the way, it raised fundamental questions about who controls the future of gaming—and whether anyone should be allowed to control that much of it at all.

What Microsoft Was Really Buying

To understand why this acquisition matters, you need to understand what Activision Blizzard actually is. This isn't just one company—it's a conglomerate of gaming empires stitched together over decades.

There's Activision Publishing, home to Call of Duty, one of the best-selling entertainment franchises in history. There's Blizzard Entertainment, the legendary studio behind World of Warcraft, Diablo, StarCraft, and Overwatch—games that have defined entire genres and spawned professional esports leagues. There's King, the mobile gaming giant that created Candy Crush Saga, a puzzle game that has been downloaded billions of times and generates roughly a billion dollars in annual revenue by itself.

Combined, these properties brought in about $8.8 billion in 2021. That's more revenue than most movie studios, more than most music labels, more than many traditional media companies you've heard of.

Microsoft, of course, wasn't exactly a stranger to gaming. The company had been making Xbox consoles since 2001 and had built Xbox Game Studios into a respectable collection of development teams. In March 2021, Microsoft had already made a major move by acquiring ZeniMax Media—the parent company of Bethesda Softworks—for $7.5 billion. That deal brought The Elder Scrolls, Fallout, Doom, and other beloved franchises under Microsoft's umbrella.

But Activision Blizzard was something else entirely. This wasn't just adding another studio to the roster. This was Microsoft becoming the third-largest gaming company on Earth, trailing only the Chinese tech giant Tencent and Sony of Japan.

The Unlikely Origin Story

The deal's origins trace back to an unexpected place: TikTok.

In 2020, the Trump administration was pressuring ByteDance, TikTok's Chinese parent company, to sell its American operations. Microsoft was among the suitors. Bobby Kotick, Activision Blizzard's controversial chief executive, happened to have connections with ByteDance's founder, Zhang Yiming. According to Kotick, Yiming preferred the idea of selling to Activision over Microsoft.

There was just one problem. Activision couldn't outspend Microsoft on such a purchase. So Kotick floated an idea to Satya Nadella, Microsoft's chief executive: what if they partnered on co-ownership?

That conversation planted a seed. The TikTok deal never materialized—ByteDance ultimately kept the app—but the idea of Microsoft and Activision Blizzard combining forces stayed on the table.

By 2021, the discussions had evolved. Kotick, Nadella, and Phil Spencer—the head of Microsoft's gaming division—were having conversations about a different kind of threat. The gaming industry was changing rapidly, and they saw Chinese companies like Tencent and NetEase, plus Apple and Google with their mobile platforms, as existential competitors. Activision Blizzard had incredible content but lacked expertise in machine learning, cloud computing, and data analytics—precisely the areas where Microsoft excelled.

The complementary nature of the two companies was obvious. Microsoft had the technology infrastructure. Activision Blizzard had the games.

The Shadow Over the Deal

In July 2021, something happened that would hang over this acquisition like a storm cloud: the California Department of Fair Employment and Housing filed a lawsuit against Activision Blizzard alleging widespread sexual harassment, employment discrimination, and retaliation within the company.

The allegations were severe. The lawsuit painted a picture of a workplace culture where women were routinely harassed, passed over for promotions, and pushed out of the company. By November, the allegations had expanded to include Bobby Kotick himself, with reports that he had known about misconduct for years and failed to report it to the board.

According to The Wall Street Journal and Bloomberg News, this crisis accelerated Activision Blizzard's interest in being acquired. The company had reportedly been considering a buyout from several suitors, including Meta, the company formerly known as Facebook. Weaker-than-expected game sales and production delays had already made the company's stock attractive to potential buyers. The lawsuit made some on the board eager for an exit.

Microsoft approached Activision Blizzard again in the days immediately following the November 2021 Wall Street Journal report. While Kotick had been hesitant about selling, the board pushed forward with negotiations. For Kotick personally, the deal represented something of a golden parachute—various scenarios projected payouts ranging from $252 million to nearly $293 million.

On January 18, 2022, Microsoft announced its intent to acquire Activision Blizzard for $68.7 billion in cash—roughly $95 per share. Activision Blizzard's stock jumped nearly 40 percent in pre-market trading that day.

The Mobile Gaming Angle

When Phil Spencer talked publicly about the acquisition, he emphasized something that might surprise people who think of Microsoft primarily as a console and PC company: mobile games.

There are about 200 million game console users worldwide. That sounds like a lot until you consider that the mobile gaming market reaches more than three billion people. Three billion. That's nearly half of everyone on Earth.

King, the Activision Blizzard subsidiary that makes Candy Crush, was arguably the crown jewel of this deal from a pure market-reach perspective. The game isn't just popular—it's a phenomenon that has maintained its grip on the mobile gaming charts for over a decade. It reaches demographics that would never touch an Xbox controller.

Microsoft saw this acquisition as a way to leapfrog into mobile gaming leadership overnight. They also saw it as positioning for something even bigger: the metaverse.

In Activision Blizzard's statement about the acquisition, they described gaming as being at "the forefront of the development of the emerging metaverse." Some journalists interpreted both this deal and the earlier Bethesda acquisition as Microsoft's attempt to compete with Meta in the race to build virtual worlds where people would spend increasing amounts of their lives.

The Regulators Step In

A deal this large doesn't happen without government approval. And in the case of Microsoft and Activision Blizzard, it required approval from regulators around the world.

Some approvals came relatively smoothly. China's State Administration for Market Regulation, known as SAMR, cleared the deal. The European Commission conducted its review and eventually approved as well. But two regulatory bodies decided to fight.

The United States Federal Trade Commission, commonly abbreviated FTC, launched an investigation almost immediately. The FTC, rather than the Department of Justice, took the lead because the agency had become increasingly aggressive about scrutinizing mergers in the technology sector. Several United States Senators—Elizabeth Warren, Bernie Sanders, Sheldon Whitehouse, and Cory Booker—wrote to the FTC expressing concerns that both Microsoft and Activision Blizzard had "failed to protect the rights and dignity of their workers" and urging the agency to oppose the merger if it would "enhance monopoly power."

On December 8, 2022, the FTC formally announced its intention to block the acquisition. Their argument centered on competitive harm: they believed Microsoft would gain too much control over gaming, particularly in the emerging cloud gaming space. They also pointed to what had happened after Microsoft acquired Bethesda—despite what the FTC claimed were assurances that games would remain multiplatform, some Bethesda titles had become Xbox exclusives.

The European Commission pushed back on this characterization, noting they had approved the Bethesda deal unconditionally because they saw no "material impact" on the gaming market even if Microsoft made those titles exclusive.

Sony's Fears

Behind many of the regulatory concerns lurked one company's lobbying: Sony.

Sony makes the PlayStation console, Microsoft's primary competitor in the gaming hardware market. And Sony was deeply worried about one franchise in particular: Call of Duty.

Call of Duty is not just a successful game series. It's a cultural institution. Every November, a new installment arrives, and every November, it becomes one of the best-selling games of the year. The franchise has generated tens of billions of dollars in lifetime sales. PlayStation owners buy Call of Duty in enormous numbers.

Sony's fear was simple and understandable: what if Microsoft made Call of Duty exclusive to Xbox?

Microsoft insisted it had no intention of doing so. The company argued that keeping Call of Duty on PlayStation made financial sense—why cut off millions of potential customers? Microsoft eventually committed to keeping Call of Duty available on PlayStation through 2033, a full decade into the future.

But Sony wasn't satisfied. The company continued lobbying regulators worldwide, warning that Microsoft's assurances couldn't be trusted.

The irony wasn't lost on Microsoft's lawyers. In their response to the FTC, they pointed out that Sony itself maintains numerous exclusive titles that cannot appear on Xbox. PlayStation has long used exclusive games as a competitive weapon. Microsoft argued that Sony was essentially trying to use government regulators to prevent a competitor from doing what Sony itself does constantly.

The British Blockade

While the FTC created headaches, the more serious threat came from across the Atlantic.

The United Kingdom's Competition and Markets Authority, known as the CMA, launched its own investigation into the merger. Unlike the FTC, which operates within a legal system that ultimately requires federal judges to approve blocking actions, the CMA has more direct authority to simply prohibit mergers it finds anticompetitive.

The CMA's concerns focused heavily on cloud gaming. This is a technology that allows people to play games streamed over the internet, similar to how Netflix streams movies. Instead of needing a powerful console or gaming PC, players can use relatively modest devices because all the computing happens in remote data centers. The games are essentially played on distant servers and the video is transmitted to the player's screen.

The CMA worried that Microsoft, which operates Azure—one of the world's largest cloud computing platforms—would have an unfair advantage in cloud gaming if it also controlled blockbuster content like Call of Duty and World of Warcraft. They envisioned a future where Microsoft could bundle its Azure cloud infrastructure with its massive game library in ways that no competitor could match.

In April 2023, the CMA issued a preliminary ruling that would have blocked the merger entirely. Microsoft was furious. The company's public statements bordered on insulting, with Microsoft president Brad Smith saying the CMA had adopted "a flawed decision" and questioning whether the United Kingdom was open for business in the technology sector.

The Courtroom Drama

Back in America, the battle was heating up. The FTC requested a temporary restraining order and preliminary injunction to prevent Microsoft from closing the deal on June 12, 2023.

A federal court granted the temporary restraining order the next day, freezing the acquisition while hearings were held. From June 22 to June 30, 2023, both sides presented their arguments before Judge Jacqueline Scott Corley in San Francisco.

The FTC's case centered on Call of Duty and cloud gaming. They argued that Microsoft would inevitably use these properties to harm competition, even if the company claimed otherwise. Microsoft countered that keeping Call of Duty on PlayStation was economically rational and that the cloud gaming market was too nascent to be meaningfully monopolized by anyone.

Microsoft's lawyers also made a practical argument: if the court granted the injunction, the company might simply walk away from the deal. They described the acquisition process as a "three-year administrative nightmare" and suggested their patience had limits.

On July 11, 2023, Judge Corley issued her ruling. She denied the permanent injunction and lifted the temporary restraining order.

Her reasoning was straightforward. The FTC, she wrote, "has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition." In fact, she found the opposite: "the record evidence points to more consumer access to Call of Duty and other Activision content."

The FTC scrambled to appeal. They went to the Ninth Circuit Court of Appeals on July 12, the day after the ruling. They also filed a separate motion asking Judge Corley to issue another injunction while the appeals court considered the matter. She denied that motion too.

On July 14, 2023, the Ninth Circuit denied the emergency appeal.

The FTC formally withdrew its challenge on July 20, 2023, though it reserved the right to refile later. They would eventually reopen the case in September 2023, but by then it was too late to stop the merger.

The British Compromise

With the American legal battle essentially won, attention turned back to Britain.

Microsoft had a problem. The original deal was supposed to close by July 18, 2023. If it didn't close by then, Microsoft would owe Activision Blizzard a $3 billion breakup fee. The companies could mutually extend the deadline, but the CMA still hadn't approved anything.

Rather than continue fighting, Microsoft proposed a creative solution: they would essentially carve out the cloud gaming rights for Activision Blizzard's games and hand them to someone else.

The company that stepped up was Ubisoft, the French gaming giant behind Assassin's Creed, Far Cry, and numerous other franchises. Under Microsoft's revised proposal, Ubisoft would control the cloud gaming rights to Activision Blizzard games for fifteen years. Microsoft would still own the games for console and PC, but when it came to streaming those games over the cloud, Ubisoft—not Microsoft—would hold the cards.

This was a clever maneuver. It directly addressed the CMA's core concern about Microsoft leveraging Azure's cloud infrastructure alongside its game content. By separating these elements, Microsoft defused the competition argument.

The companies extended the merger deadline to October 18, 2023. The CMA conducted a fresh Phase 1 investigation of the revised terms. And on October 13, 2023, the CMA announced its approval.

Microsoft completed the acquisition that same day.

The Aftermath

The deal closed at a total cost of $75.4 billion—somewhat higher than the original $68.7 billion announcement due to various expenses accumulated during the lengthy approval process.

Activision Blizzard became part of Microsoft Gaming, sitting alongside Xbox Game Studios and ZeniMax Media as sibling divisions. Phil Spencer, who had led Xbox for years and had championed the acquisition, now oversaw an empire encompassing some of the most valuable intellectual property in gaming history.

Bobby Kotick's fate was less clear. According to The Wall Street Journal, he was expected to "depart once the deal closes," though Kotick himself expressed interest in staying. Regardless of the precise timing, the acquisition represented the end of his era at the company he had led since 1991.

The regulatory battles, however, didn't entirely end with the deal's closure.

In January 2024, Microsoft announced layoffs of approximately 1,900 employees across its gaming division, many of them from Activision Blizzard. The FTC seized on this development, arguing in February 2024 filings that the job cuts contradicted assurances Microsoft had made about keeping the companies operating independently. Microsoft countered that the cuts were in areas of overlap between the organizations—a natural consequence of any merger.

The FTC amended its case again in July 2024 after Microsoft raised prices for its Xbox Game Pass subscription service and created a new lower-cost tier that removed day-one access to new games. The agency called this a "degraded product" that harmed consumers, inconsistent with Microsoft's pre-acquisition assurances.

These arguments ultimately went nowhere. In early May 2025, the Ninth Circuit denied the FTC's appeal of Judge Corley's original ruling. By May 22, 2025, the FTC dropped the case entirely.

What It All Means

The Microsoft-Activision Blizzard merger represented something new in gaming: consolidation at a scale the industry had never seen.

The three billion people with smartphones in their pockets can now play games owned by one of the world's largest technology companies. The most popular first-person shooter franchise on Earth belongs to the maker of Windows and Azure. Classic franchises from Warcraft to Candy Crush to Call of Duty to The Elder Scrolls now share a corporate parent.

Whether this consolidation is good or bad for gamers remains genuinely uncertain. Microsoft has made commitments to keep Call of Duty on PlayStation for a decade. But what happens in 2034? The company has also shown that it will bring beloved franchises to its Game Pass subscription service, potentially giving players access to massive libraries of games for a monthly fee rather than individual purchases. That's good for some players and concerning for others who worry about the long-term sustainability of subscription models.

The regulatory battles also set precedents that will echo through future tech mergers. The FTC's aggressive challenge—and ultimate failure—demonstrated both the appetite among some regulators to limit big tech acquisitions and the legal obstacles they face in doing so. The CMA's creative compromise with Microsoft showed that regulators can extract meaningful concessions even when they lack the power to block deals outright.

Phil Spencer once mentioned, when discussing his hopes for the acquisition, that he'd love to revive some older Activision Blizzard franchises he personally enjoyed—games like King's Quest, Guitar Hero, and Hexen: Beyond Heretic. Whether those revivals happen remains to be seen.

But that's perhaps the most human element of this entire seventy-five-billion-dollar story. At the end of the day, it's about games. About the experiences people have when they pick up a controller or tap a screen. About worlds that exist nowhere except in software and imagination.

Microsoft now owns more of those worlds than any American company in history. What they build in them—and who gets to visit—will shape the future of an industry that has already surpassed movies and music combined in revenue.

The biggest video game acquisition ever is complete. The game, as they say, has just begun.