On September 21st, Microsoft announced its plan to acquire ZeniMax Media, one of the largest privately held game developers, the parent company of several industry-leading companies such as Bethesda Softworks, creators of successful gaming franchises including The Elder Scrolls and Fallout. Bethesda will bring an important set of games, technology, talent, as well as a track record of blockbuster commercial success to Microsoft’s console: Xbox. The acquisition is expected to close in the second half of fiscal year 2021 with minimal impact to non-GAAP operating income in fiscal years 2021-2022 and, as established by the agreements, the payment will be of $7.5 billion in cash. It is no coincidence that Microsoft's move came weeks before the new video game consoles, Xbox Series X and S, released on November 10th, whose distinctive new features will be now be accompanied by a unique assortment of games, key for their competition against Sony’s upcoming PlayStation 5. The gaming sector has become the largest and fastest-growing form of entertainment in the world and is expected to be more than $200 billion in annual revenue in 2021. This trend is also due to current pandemic, which left many consumers with more free time, being confined to their homes and seeking new distractions. The software giant’s deal is just one of the many completed billion-dollar acquisitions of the past two decades. Indeed, the company has ranged various fields, from social media to hardware and video games.
Microsoft’s Strategy behind the acquisition
The effects of the purchase won’t be visible immediately, as Microsoft will honor the exclusivity commitments to time-bending shooter “Deathloop” and horror game “Ghostwire: Tokyo”, two games which are set to be PS5 time exclusives. Future Bethesda games will be inserted into the monthly Xbox Game Pass subscription, PCs and "other consoles on a case by case basis", as Phil Spencer, head of Xbox Studios, confirmed to Bloomberg. Game exclusivity though might not be the strategy Microsoft is willing to follow anymore, but rather, it might be about driving new subscriptions for Game Pass. This strategy justifies one of the biggest franchises in gaming, Halo, not being set as exclusive to the Xbox platform anymore. Microsoft has competed with Sony in the past in an exclusivity game that kept it lagging behind throughout the Xbox One generation. Over the recent years, Sony has acquired promising developers and involved them over many years to produce large sequel-friendly franchises like “Spider-Man”and “Horizon Zero Dawn”. In addition, it also maintained strong relationships with independent Japanese partners, like Square Enix, to maintain its edge so that the new games as “Final Fantasy” could arrive to PlayStation first. In addition to Bethesda, the acquisition will also bring ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog and Roundhouse Studios under Microsoft’s control. Microsoft may not focus on exclusivity anymore, but studios are needed, as they entitle you to decide where and at what price the variety of games will be sold, including giving them away for free as part of a subscription service. With this deal, Microsoft boasts the expansion of Microsoft’s studio team number to 23. The software giant’s executives have stressed that major developers, like Bethesda, will keep much of their independence, with over 2,300 Zenimax employees being absorbed by Microsoft. This merger is expected to increase and secure Microsoft’s subscription revenue, at an average of $10 per user, accounting the limited time signups of $5 and $1 and the $15 premium Ultimate subscription.
“When we think about strategy, whether it’s in gaming or any other part of Microsoft, each layer has to stand on its own for what it brings. When we talk about our content, we want our content to be broadly available.” – Microsoft CEO Satya Nadella
Edoardo D'Aprile
The effects of the purchase won’t be visible immediately, as Microsoft will honor the exclusivity commitments to time-bending shooter “Deathloop” and horror game “Ghostwire: Tokyo”, two games which are set to be PS5 time exclusives. Future Bethesda games will be inserted into the monthly Xbox Game Pass subscription, PCs and "other consoles on a case by case basis", as Phil Spencer, head of Xbox Studios, confirmed to Bloomberg. Game exclusivity though might not be the strategy Microsoft is willing to follow anymore, but rather, it might be about driving new subscriptions for Game Pass. This strategy justifies one of the biggest franchises in gaming, Halo, not being set as exclusive to the Xbox platform anymore. Microsoft has competed with Sony in the past in an exclusivity game that kept it lagging behind throughout the Xbox One generation. Over the recent years, Sony has acquired promising developers and involved them over many years to produce large sequel-friendly franchises like “Spider-Man”and “Horizon Zero Dawn”. In addition, it also maintained strong relationships with independent Japanese partners, like Square Enix, to maintain its edge so that the new games as “Final Fantasy” could arrive to PlayStation first. In addition to Bethesda, the acquisition will also bring ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog and Roundhouse Studios under Microsoft’s control. Microsoft may not focus on exclusivity anymore, but studios are needed, as they entitle you to decide where and at what price the variety of games will be sold, including giving them away for free as part of a subscription service. With this deal, Microsoft boasts the expansion of Microsoft’s studio team number to 23. The software giant’s executives have stressed that major developers, like Bethesda, will keep much of their independence, with over 2,300 Zenimax employees being absorbed by Microsoft. This merger is expected to increase and secure Microsoft’s subscription revenue, at an average of $10 per user, accounting the limited time signups of $5 and $1 and the $15 premium Ultimate subscription.
“When we think about strategy, whether it’s in gaming or any other part of Microsoft, each layer has to stand on its own for what it brings. When we talk about our content, we want our content to be broadly available.” – Microsoft CEO Satya Nadella
Edoardo D'Aprile