Microsoft's $68.7 billion Activision acquisition is crucial for the company to expand its 'metaverse' plans — here's what that means

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Microsoft's $68.7 billion Activision acquisition is crucial for the company to expand its 'metaverse' plans — here's what that means
Microsoft's CEO of Xbox, Phil Spencer, who led the talks to buy Activision.Dan Steinberg/Invision/AP
  • On Tuesday, Microsoft announced plans to buy "Call of Duty" publisher Activision for nearly $70 billion in cash.
  • It's the most expensive video game acquisition of all time.
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Of the many reasons that Microsoft is willing to lavish nearly $70 billion on the purchase of video game publisher Activision, one stands out above the rest: games.

"Call of Duty," "World of Warcraft," "Diablo," and "Candy Crush" are just a handful of the major video game franchises that Activision makes, publishes, and owns. If the deal closes, pending regulatory approval, Microsoft will have grown its Xbox game library considerably.

And games, according to Microsoft's announcement of the acquisition, are key "building blocks for the metaverse."

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But what does that actually mean? Microsoft CEO Satya Nadella went into more detail in an investor conference call on Tuesday morning (emphasis ours).

"When we think about our vision for what a metaverse can be, we believe there won't be a single centralized metaverse, and there shouldn't be," Nadella said. "We need to support many metaverse platforms as well as a robust ecosystem of content, commerce and applications. In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises accessible on every device. And bringing fantastic entertainment together with new technologies, communities and business models is exactly what this transaction is about."

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Xbox leader Phil Spencer offered a similar definition later in the same call.

"Our vision of the metaverse is based on intersecting global communities rooted in strong franchises," Spencer said.

It remains to be seen what the "metaverse" actually is.

Microsoft's $68.7 billion Activision acquisition is crucial for the company to expand its 'metaverse' plans — here's what that means
Mark Zuckerberg showing his 'metaverse' avatar during Connect 2021 in October 2021 — the same presentation where Facebook became "Meta."Facebook

Billionaire Facebook cofounder and Meta CEO Mark Zuckerberg has repeatedly claimed that the metaverse is the successor to the current mobile internet.

In an October video presentation where Facebook's name became Meta, Zuckerberg also demonstrated what the future metaverse might look like and how it could work: The video depicted a world where people jump in and out of a 3D virtual space, like those in "The Matrix" and "Ready Player One."

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That potential future appears to hinge on participants wearing virtual reality or augmented reality headsets to enter the 3D space. But Xbox's Spencer told Stratechery's Ben Thompson that he sees it differently.

"The way I think about metaverse is not display specific," Spencer said. "So when people take metaverse and instantly translate to a VR or even an AR experience, I don't first go there, I first go to the user experience."

To Spencer, who's been active in the video game business for decades, "Video games...have been building what people are now defining as 'the metaverse' for many, many years."

So, what might it actually look like?

Microsoft's $68.7 billion Activision acquisition is crucial for the company to expand its 'metaverse' plans — here's what that means
In the movie "Ready Player One," a shared online space known as "The Oasis" features people in avatars of famous video game characters, like Tracer from "Overwatch" and Chun-Li from "Street Fighter."Ready Player One

"We have this view that the metaverse will not be one thing. It'll actually be built around multiple worlds that are connected and easily navigable by players and users," Spencer said.

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Perhaps there will be a "Call of Duty" world and a "Minecraft" world and a "World of Warcraft," and all those worlds are the digital wrapping on top of access to the games themselves. Maybe your avatar will wear a Master Chief helmet and a Vault-Tec jumpsuit, care of Microsoft-owned franchises "Halo" and "Fallout."

In this potential future, Microsoft's $68.7 billion investment in "the metaverse" could make a lot more sense.

In the meantime — should the deal receive regulatory approval, which Microsoft is expecting in the next 12 to 18 months — Microsoft is able to put Activision's library of games on its wildly popular Xbox Game Pass subscription service.

It's a key pillar of Microsoft's current Xbox strategy, and a key part of the reason why Microsoft bought Activision: "It's primarily about content for Game Pass," Michael Pachter, Wedbush's managing director of equity research, told Insider.

Game Pass is on track to bring in approximately $4 billion in revenue in the next 12 months, before the likes of "Call of Duty" and "Diablo" arrive.

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"Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard's incredible catalog," Spencer said on Tuesday.

Got a tip? Contact Insider senior correspondent Ben Gilbert via email (bgilbert@insider.com), or Twitter DM (@realbengilbert). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by email only, please.

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