Why is Microsoft Making a $75 Billion Bid for Activision? Blizzard is Relying on Call of Duty

The stiff-upper-lip bureaucrats in charge of global competition policy have something in common with millions of the world’s most ardent gamers: an infatuation with Call of Duty.

The videogame franchise, arguably the most successful ever, is at the center of a debate over whether Microsoft’s planned $75 billion acquisition of Call of Duty owner Activision Blizzard ATVI 1.97% increase; green up pointing triangle could give it an unfair advantage to dominate the videogame industry.

The Competition and Markets Authority of the United Kingdom mentions Call of Duty 41 times in a 20-page explanation of its decision to reject the merger last month. The game was mentioned 18 times in the FTC’s 23-page complaint to block the deal in December. The transaction was authorized by the European Union this month, but only after Microsoft promised to allow competitors to stream Call of Duty and other Activision games over the cloud.

Regulators are obsessed with the franchise not just because of its great and long-lasting popularity, but also because it may provide Microsoft an unfair advantage in cloud gaming, a new and more economical way of obtaining games, if it decides to restrict the series from competitors in the future.

Call of Duty’s “loyal fanbase and enduring appeal have made it particularly valuable, influencing gamer engagement and gaming product adoption,” according to the FTC’s complaint.

The firms claim the deal would not harm competition and that they have promised to licensing Call of Duty games to competitors as well as allowing customers to stream current and future Activision products through their preferred cloud-gaming platform.

Call of Duty, now two decades old, is one of the most profitable entertainment assets of all time, with over $30 billion in lifetime revenue, more than any other shooter series and many movie franchises combined. According to data firm Circana, Call of Duty’s annual installments have ranked first in U.S. videogame series sales for the previous 14 years in a row.

Microsoft wants to buy Activision in order to connect the developer’s hit games to its Xbox Game Pass subscription service, which offers cloud gaming, Netflix-like game streaming, and what some executives and analysts predict will fuel industry development for years.

While Activision offers numerous famous games, Call of Duty is the most well-known due to its devoted fan base. The property is so dominating and cherished by hard-core gamers that regulators are concerned that denying other game distributors access to the franchise will ruin competition in the budding cloud-gaming business.

Unlike console gaming, where Microsoft’s Xbox system follows Sony Group’s PlayStation, cloud gaming has a plethora of prospective competitors. Some regulators say that without access to Call of Duty, any cloud rival would be unable to compete for users.

The historic transaction—potentially one of the largest purchases in the history of the technology industry—is now jeopardized as a result of the United Kingdom’s refusal. While Microsoft has pledged to launch an appeal, antitrust attorneys say it will be a difficult struggle to win, and doing a deal without the country would be prohibitively expensive and complex.

Call of Duty debuted in 2003, just as multiplayer online gaming was gaining popularity. It distinguished itself from other first-person shooters on the market by providing outstanding graphics and being simple to learn but tough to master, according to Cowen analyst Doug Creutz.

Call of Duty has stayed popular due to Activision’s consistent investment, which the firm does not disclose but is likely in the hundreds of millions of dollars each year and difficult for competitors to match, according to Creutz.

Inertia is another aspect. For many people, the series has been so popular for so long that it is the one game that all of their friends play.

According to Wedbush Securities analyst Michael Pachter, Call of Duty’s annual release calendar distinguishes it from other shooters. Few other gaming firms have the expertise, infrastructure, or resources to generate such ambitious sequels year after year.

“It’s what makes Call of Duty sticky,” he explains. “There’s always something exciting to look forward to.”

Every year, the next installment is set in the midst of a new conflict, either historical or imaginary. While the basic appearance and war theme remain same from year to year, each version is set in a different time period and locale, with fresh story lines, maps, and weapons. According to gamers, three Activision studios alternate assuming the major role in producing it, which helps keep it fresh.

Unlike other franchises, Call of Duty provides a variety of ways to play, including single- and multiplayer modes, as well as versions for cell phones, consoles, and PCs, as well as free and paid versions with varying objectives.

When another multiplayer shooter, Epic Games’ “Fortnite,” exploded in popularity in recent years, Activision responded with “Blackout,” a game within “Call of Duty: Black Ops 4,” featuring the same “battle royale” style of play, in which a large group of players fights until only one is left standing. The corporation later created a standalone version named “Call of Duty: Warzone” that used the same free-to-play business model as “Fortnite.”

According to the Anti-Defamation League and some lifelong fans, Call of Duty’s popularity has also left it with certain ongoing issues. They claim that some gamers use racist and threatening language in voice chat, in violation of Activision’s regulations.

According to Annabel Ashalley-Anthony, founder of Melanin Gamers, a London-based NGO dedicated to fostering diversity and inclusion in the videogame business, improper trash language is more prevalent in Call of Duty than in most other large games. “It is the worst,” she admitted.

According to an Activision spokeswoman, the majority of the company’s players do not engage in this type of conduct. “We are committed to making our games more inclusive and safe for everyone,” he explained. “In recent years, we have banned 500,000 Call of Duty accounts for violating our code of conduct.”

Microsoft revealed plans to acquire Activision in January 2022, with the transaction valued at $69 billion after adjusting for the videogame publisher’s net cash.