Gaming stocks rise after Microsoft (MSFT Stock) buys Activision for $68.7bn

Microsoft share price has slipped back after it announced it had agreed a deal to buy Call of Duty maker Activision for a price of $95 a share, or $68.7bn.

Following on from the recent $12.7bn deal between Take-Two Interactive and Zynga earlier this month, this is a big step up with Microsoft getting in on the ground floor when it comes to creating as well as overseeing content on its own gaming platform.

Activision has been in the news for all the wrong reasons recently as management battled allegations of a toxic work culture, which has seen the shares slide back over 35% from their February 2021 record highs.

With annual revenues of just over $8bn the deal gives Microsoft, which has annual revenues of $175bn, the ability to oversee and drive the content across its platforms, not only PC games but gaming consoles as well, as it looks to diversify its revenue stream.

There is a worry that the deal could raise antitrust concerns if Microsoft decides to restrict new content to its own platform, and not allow games on its nearest competition, which is Sony’s PlayStation, and the PS5?

While some have argued that this would be against its own interests and curtail its revenue stream, this wouldn’t be unusual given how Microsoft has got itself into trouble by bundling hardware and software previously.

The way gaming has been going, more and more content is going online, and consoles are becoming more and more expensive. With Microsoft’s deeper pockets that will inevitably mean more investment in faster and more realistic graphics, as well as VR, which in turn will deliver richer content.

There is likely to be a downside however and we look to be already seeing it with more and more games now only available to play online despite the customer having to buy an installation CD. It also means that as well as buying the CD, customers will also have to pay for the monthly Xbox Live subscription.

It’s already started to happen with Battlefield 2042 which you can only play online, despite having to pay for the installation CD as well.

Nonetheless, we’ve seen the likes of Electronic Arts, Ubisoft and Take-Two Interactive shares rise on today’s news.