Why Mobile Gaming Led Microsoft to Acquire Activision

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Executive and CEO of Microsoft Phil Spencer discusses the events that lead to the company’s controversial choice to absorb Activision Blizzard King in an interview with Second Request Podcast.

In the interview, Spencer discusses how Microsoft sees mobile gaming as a service issue—but not for users or even for the company—but for the developers. The goal for Phil is to attract the top game developers to work on Xbox (Team Xbox) projects, and in exchange, Microsoft will offer the finest environment for these developers’ work and their innovations.

Microsoft would ideally like to grow its gaming business into mobile platforms, which are unquestionably a significant source of revenue in the current gaming environment. Even while the Windows and Xbox gaming consoles have been a success, they still don’t come close to realizing their full potential without entering the mobile market.

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Diablo Importal

Spencer comments “Mobile is the largest segment in gaming. It’s the fastest growing segment in gaming, and the largest franchises that people are playing, more and more are available on phones. Not necessarily on the phone exclusively, but they are available on the phone.”

In the podcast, Phil talks about the distribution perspective and how Microsoft is close to developing a method of integrating mobile phones as a distribution platform for Xbox games. But what about Game Pass? Xbox games may currently be played on mobile devices if you have Game Pass, however, the games themselves weren’t made for mobile gaming and don’t compare favourably to other platforms that have established mobile services and developers.

At this point, Phil points out a flaw: Apple and Google dominate the marketplace for mobile stores, suggesting that launching an Xbox store for phones is a ship doomed to sink. This is an outdated notion in light of the EU’s Digital Markets Act, which may force Apple to open their devices in third-party stores. This will probably alter the acquisition’s context, but it won’t stop Microsoft from moving on with their mobile initiative.

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Diablo Importal

Nonetheless, the CEO has some other intentions. In order to improve viewing, Spencer claims that Microsoft’s strategy is to find content that resonates with the audience for mobile gaming and, once that connection has been made, to actively engage with that audience. A  promotional effort akin to Nintendo’s own gaming initiative, which has already progressed to new endeavours including theme parks and feature films.

Microsoft believes that Activision Blizzard King’s content is exactly what consumers want, and in terms of financial prowess, titles like Call of Duty Mobile and Diablo Immortal brought out enormous numbers this year, and are names that prove revered in gaming communities that will no doubt follow the brand to Microsoft.

Here is Phil Spencer’s full comment below:

“We look at the largest gaming companies on the planet. The largest gaming company is Tencent. And Tencent has a strong mobile presence. And you see mobile is the largest category of gaming out there.

Three billion people play video games. Mobile phones are the most prolific consumer electronic device on the planet that plays games. And in many places, you’re going to have to reach customers with devices that are already in their pocket.

Most families on the planet won’t go out and spend specific money to buy a bespoke gaming device. So when you think about the world’s largest franchises, those will exist on mobile. They’re going to have to over time. You’re going to have to find some way for everyone on the planet to play those games. Just like you’ve seen for music and video, where all of the services are available on the devices people want to play on.

Mobile is the largest segment in gaming. It’s the fastest growing segment in gaming, and the largest franchises that people are playing, more and more are available on phones. Not necessarily on the phone exclusively, but they are available on the phone.

So when we are thinking about being a platform for creators, if somebody says I’m gonna go build a game on Xbox, we want to make sure that we can offer to that creator the largest set of players possible for their game. Some of that is through the business models. We have talked about ensuring that we’ve got different flexible business models for customers, so that they can get to the right piece of content the right way, that makes financial sense for the creator.

Distribution is another way. How do we distribute the games to different devices? What’s the kind of technology mechanism behind that? And then when we think about mobile, we’re going to find a way to allow people who are creating Xbox games, to see that players with mobile phones on the planet are part of the audience that they can reach.

So for us, when we look at what we’re capable of today, and where people engage with Xbox. Most people who engage with Xbox engage on consoles. We have a growing presence on Windows. That’s growing, and we’re investing there, and Gamepass, our subscription is available there.

But the place where we’re completely irrelevant is on the largest platform, mobile. So, we looked at the opportunities out there, we said, well, we’re not going to be able to create a platform component. Because the two platform holders, the duopoly as you said, won’t allow us to put an Xbox, with Game Pass and everything that’s there, on those devices. They literally block it.

So the only other option for us today is to find content that players on mobile phones love, that they will go play, so that we can start to build a foothold with players on mobile. Then we can look to increase discoverability and business model and distribution for games through the engagement that we have on mobile devices.

And that’s what led to this, looking at Activision Blizzard King. Looking at the strength that they have built with King, with Call of Duty mobile, with Diablo Immortal, which is growing. They’ve done a very good job of finding more and more customers on mobile, which made it an attractive partnership for us. “

With the addition of 30 internal game development studios, extra publishing resources, and esports production capabilities, this acquisition will transform Game Pass into one of the most engaging and diverse lineups of gaming content in the market. Users should watch for any additional changes until the purchase is slated to finalize in fiscal year 2023.

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