For all obstacles Microsoft MSFT 2.44%
still faces in its efforts to acquire Activision Blizzard,
THAT WE -0.71%
It can actually prove to be the easy part to get the deal done.
In its first-quarter results Monday morning, Activision said the deal is still about to close in Microsoft’s next fiscal year, which begins in July. The long window for a deal announced in January reflects the high level of scrutiny that the deal is expected to receive among lawmakers, who have begun to look closely at major technological advances. In fact, four U.S. senators last month expressed concern over the transaction to the Federal Trade Commission, saying the deal could exacerbate Activision’s now well-documented internal cultural problems. “We are deeply concerned about the consolidation of the technology industry and its impact on workers,” the letter read.
The strong relationships that Microsoft has cultivated in Washington over the years – stemming from its own days under the antitrust microscope – still give the company an important advantage in ultimately getting the deal closed. But the value of Activision’s business at the time seems to be an important issue. The company’s first-quarter results released Monday morning showed another sharp drop for its “Call of Duty” franchise. Revenue from the Activision publishing division, which includes the franchise, fell 49% year-over-year to $ 453 million. It was also 33% below the $ 681 million in revenue analysts had expected for the segment.
The company also reported around 100 million monthly active users for the Activision segment – a decrease of seven million from the previous quarter and the lowest consumption measurements for the device in more than two years. Activision blamed the deficit on both lower sales of the premium “Call of Duty: Vanguard” sequel released in November and lower commitment on its free-to-play offering called “Call of Duty: Warzone.”
Many factors can come into play. The latest sequel has garnered some of the lowest reviews in the franchise. The first quarter also included the release of “The Fire Ring”, a role-playing game from Japan’s Bandai Namco Entertainment that has proven to be a big hit. “Vanguard” was also the 18th full sequel to the franchise in as many years; analyst Corey Barrett of M Science says “franchise fatigue” has probably been among the biggest factors in Call of Duty’s recent weakness.
Activision has other great games; analysts noted on Monday that the pipeline for the company’s Blizzard unit for next year looks strong. But Microsoft still needs “Call of Duty” to get back on track. A major reason for the $ 75 billion acquisition is the ability to add blockbuster franchises like “Call of Duty” to subscription-based services like Xbox Game Pass and Xbox cloud games. Activision’s current management said Monday in the company’s earnings announcement that the next game in the series will be a sequel to 2019’s “Modern Warfare” – the best-selling title in the franchise to date. Microsoft, meanwhile, will hope that Call of Duty’s wounds are not fatal.
Write to Dan Gallagher at email@example.com
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