Microsoft is attempting to gain approval from regulators to acquire Activision Blizzard for $68.7 billion. The company revealed that it had previously opened discussions with mobile game developer, Zynga, but did not proceed with the deal. Phil Spencer, Microsoft Gaming CEO, testified at the hearing in San Francisco on Friday. The hearing began on Thursday and is due to continue next week. This came after the Federal Trade Commission gained a temporary restraining order to prevent Microsoft from finalizing the Activision purchase. The court agreed to maintain the status quo as it reviewed the FTC’s request for a preliminary injunction for the deal.
Microsoft’s Interest in Zynga
Spencer expressed respect for the people at Zynga and what they built but explained that for Microsoft’s opportunity, they thought they needed to have something bigger than Zynga, given their small starting space in the mobile gaming business. Take Two Interactive, the publisher of Grand Theft Auto titles and other games, eventually acquired Zynga for $12.7 billion in May 2021. Prior to the Microsoft offer, Activision met with a financial firm to work on topping Take-Two’s purchase of Zynga. Spencer did not disclose the period when Microsoft was in talks with Zynga, and the company declined to comment. However, Zynga stated in a filing last year that executives met in September 2021 with representatives from an unnamed “strategic acquirer,” which “expressed non-specific interest in an acquisition of Zynga.” This was not the first time Microsoft showed interest in Zynga. The company reportedly tried to buy Zynga in 2010.
Microsoft Considers Mobile Gaming as a Faster Growth Opportunity
Spencer stated that mobile games represent a faster opportunity for growth than PC games and consoles, where Microsoft gets most of its gaming revenue. Microsoft has attempted to boost cloud-based game streaming on mobile devices. However, this effort has challenges, including the smaller typefaces on phone screens and the fact that smartphones do not come with controllers, according to Spencer. Additionally, Apple has hindered Microsoft’s efforts to bring its Game Pass library of video games to its App Store.
Activision as a Strategic Acquisition
After the discussions with Zynga, Spencer worked with Microsoft’s finance chief, Amy Hood, to explore mobile opportunities. Activision was the biggest publisher of mobile content, and it was already a long-term Microsoft partner. The company grew its portfolio of mobile games with the 2016 acquisition of King, publisher of Candy Crush Saga. About 35% of the company’s $8 billion in 2022 revenue came from its King segment.
Microsoft’s interest in Zynga and their discussions with the company demonstrate the company’s efforts to expand its presence in the video game industry. The company recognizes mobile gaming as a growth opportunity and has been exploring ways to tap into this market. The acquisition of Activision is a strategic move for Microsoft, as it seeks to position itself as a major player in the industry.
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