Microsoft to buy Call of Duty, World of Warcraft developer for $68.7 billion

Microsoft has agreed to buy video game company Activision Blizzard Inc., which has been roiled by allegations of sexual harassment and gender discrimination, in an all-cash deal valued at $68.7 billion.

The purchase comes amid a boom in the video game business during the pandemic. If completed, the deal would greatly expand the Microsoft video game library with Activision’s popular game franchises like Call of Duty, World of Warcraft, Overwatch, and Candy Crush.

The acquisition is the largest yet by Microsoft CEO Satya Nadella in his bid to reestablish the company as a gaming powerhouse. The company has spent over $10 billion to buy out game studios since Nadella became CEO in 2014, including the companies responsible for Doom and Minecraft.

Microsoft has been positioning its Game Pass, a monthly subscription service that allows users to access a catalog of video games, as the “Netflix for games.” Game Pass now has 25 million subscribers, according to the Activision announcement, up from 18 million in early 2021.

The purchase is expected to increase Microsoft gaming revenue by about half, making it the world’s third-largest gaming company by revenue behind China’s Tencent and Japan’s Sony. Analysts estimated Activision’s 2021 revenue at $8.7 billion, while Microsoft reported $15.4 billion in video game revenue for the fiscal year through June.

The deal is complicated by an ongoing lawsuit against Activision by California regulators for alleged sexual harassment and gender disparity among the company’s roughly 10,000 employees.

A Wall Street Journal investigation into Activision’s handling of workplace issues published in November sparked public backlash against CEO Bobby Kotick and the board of directors. Almost 2,000 employees signed a petition calling for Kotick to resign, and Microsoft said it would be re-evaluating its relationship with the company.

The announcement said that Kotick would remain as Activision’s CEO, reporting to Microsoft gaming chief Phil Spencer.

Microsoft’s largest acquisition before the Activision deal was for the professional social network LinkedIn, for which it paid $26 million.

The deal is expected to close by July 2023.