Activision: Too Many Headwinds To Navigate For Microsoft Acquisition (NASDAQ:ATVI) | Seeking Alpha
Staff, 2022-11-29 15:58:00,
David McNew
Microsoft (MSFT) plans to buy video game giant Activision Blizzard (NASDAQ:ATVI) for $68.7 billion, and details about the acquisition and reason being it can be read in my Nov. 25, 2022, Marketplace article entitled “Activision: Facing Sony And Antitrust Head On.”
PlayStation alone contributed $1.32 billion to Activision Blizzard’s total year 2021 earnings, as shown in Chart 1. Google (GOOG) (GOOGL) and Apple (AAPL) pay a licensing fee to Activision for its games used on Google Play Store and Apple App Store.
Tweaktown
Chart 1
I noted that a current headwind was a review by the UK’s “Competition and Markets Authority” to ascertain whether the deal violated antitrust laws. But it must be approved by regulators in 16 countries, and only two of them (Brazil and Saudi Arabia) have cleared it so far.
Even if Microsoft survives the barrage of government inquiries it also needs the approval of China.
Reasons Why China Will Block Microsoft-Activision Deal
A Microsoft-Activision Combination Would Erode Tencent’s Dominance
The largest global gaming company is China’s Tencent (OTCPK:TCEHY). Chart 2 shows the top 10 companies for CY 2020 and 2021. All companies increased revenues YoY except Sony (SONY). In 2021, Tencent’s gaming revenues were 2.5X larger than Microsoft and nearly 4X larger than Activision. But combining revenues of both companies, Tencent would only be 1.5X larger, and Microsoft-Activision would be No. 2 in rankings ahead of Sony.
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