Microsoft is a relative latecomer to the metaverse, but it’s making up for lost time. “With the resources and talent Microsoft’s got, they’ve spring boarded themselves into this space and it makes really strong strategic sense,” says Orthman.
If the deal goes through, Microsoft will have 30 game development studios under its roof.
“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft CEO Satya Nadella said in a statement.
“We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all.”
Microsoft’s foray into the metaverse is based around its Game Pass subscription service.
Up-front revenue from game purchases is sacrificed for the opportunity to make long-term revenue through subscription fees, in-game purchases and other microtransactions. Much like what Netflix has done in the movie business.
For $15.95 a month, Game Pass users can digitally download and play a catalogue of games. The service boasts 25 million subscribers.
This number is now sure to increase given Activision Blizzard’s nearly 400 million monthly active players.
The acquisition is about more than just about console gaming, though. While most people might view the gaming sector through the lens of consoles, they represent only a small part of the sector. Most of the gaming sector is expressed on mobile devices.
“You’ve got to play in all spaces, and Activision brings a large mobile userbase,” says Orthman. “Microsoft has realised it’s about the end-user, and you need to play across online and on mobile.”
Still, integrating videogames into the metaverse isn’t without its critics.
“Gaming’s unique consumption model and economics arguably make the challenge of altering consumer behavior to create all-you-can-eat offerings at massive scale a lot tougher than anything Amazon Prime, Hulu, and Netflix have faced,” states a 2020 report by McKinsey & Company.
It goes on: “The Netflix proposition is a practically inexhaustible library of compelling content, with a core that is exclusive to the service. Free-to-play games, by definition, don’t make sense behind a subscription paywall, especially on PCs and mobile (console providers charge a monthly fee to access online features). What’s more, the game-as-a-service model does not lend itself to a large portfolio of games, implicit in the value proposition of all-you-can-eat subscriptions, since that gaming model is all about limitless engagement with one destination.”