Microsoft Corporation (NASDAQ; MSFT) announced its plan to purchase ZeniMax Media and its game publisher Bethesda Softworks for $7.5 billion.
The price tag acknowledges that Bethesda owns some intellectual properties that are well-known and very popular in the video game marketplace. Bethesda is the creator of critically acclaimed and best-selling gaming franchises including The Elder Scrolls and Fallout.
Microsoft aims to “empower the more than three million gamers worldwide”
The acquisition is the third-biggest in Microsoft’s history. The $7.5 billion costs to acquire ZeniMax Media and Bethesda is similar to the price tag of GitHub and is less than the amount it paid for LinkedIn and Skype.
In a statement, Microsoft CEO Satya Nadella said, “Gaming is the most expansive category in the entertainment industry, as people everywhere turn to gaming to connect, socialize and play with their friends.”
“Quality differentiated content is the engine behind the growth and value of Xbox Game Pass—from Minecraft to Flight Simulator. As a proven game developer and publisher, Bethesda has seen success across every category of games, and together, we will further our ambition to empower the more than three billion gamers worldwide,” added Nadella
On the other hand, ZeniMax Media Chairman and CEO Robert Altman said, “This is a thrilling day for this company, our employees, and our fans. We have enjoyed a close partnership with Microsoft for decades, and this deal is a natural progression of those years working together.”
Microsoft will be adding about 2,300 ZeniMax Media employees to its payroll. The deal is expected to close in the second half of fiscal 2021.
The tech giant bowed out of negotiations to buy an interest in TikTok, but it is continuing its strategy of using mergers and acquisitions to stay connected to young consumers.
The video game console market
We are in the ninth generation of video consoles. On November 10, Microsoft is launching new consoles. The Xbox Series X and stripped-down Series S version will compete with Sony’s new PlayStation 5 console, which is also scheduled for release in November.
Bethesda has two studios developing upcoming titles that are by-contract will be released first on Sony consoles. Microsoft agreed to honor those commitments to Sony but future games and cross-platform availability will be reviewed on a “case-by-case basis,” Phil Spencer, head of Xbox, told Bloomberg News.
The Gamepass advantage
Microsoft said it is buying Bethesda to help increase the choices in its Xbox Game Pass game subscription service. Which now has over 15 million subscribers.
Bethesda games like Starfield currently in development will launch on Xbox Game Pass the same day that it launches on Xbox or computers, according to Microsoft.
The Xbox Game Pass may be one of the best values for gamers. With an assortment of indie games, some AA and AAA third-party games, and day-one access to all Xbox Game Studios releases, gamers get a lot for the subscription fees. When Bethesda games are loaded on Game Pass on launch day, no one can compete with the selection.
The Microsoft umbrella gets bigger and more profitable
With this purchase, Microsoft adds the Elder Scrolls series (Morrowind, Oblivion, Skyrim, etc.), Fallout, Doom, Prey, Wolfenstein, Dishonored, and The Evil Within to its growing game portfolio.
ZeniMax Media is one of the biggest, most creative companies in the industry. The 2020’s Doom Eternal, the sequel to 2016’s reboot of the first-person shooter series, was estimated to have at least 3 million copies pre-sold when it launched. And Skyrim, from the Elder Scrolls series, sold roughly 30 million copies by 2016, making it one of the best-selling video games ever.
Microsoft has been on a buying spree in the video game market for several years. The tech giant now owns American and European video game developers. The deal will increase the number of video game studios it owns to 23.
The big umbrella now includes id Software (Doom, Quake), Arkane (Dishonored, Prey, the forthcoming Death Loop), Tango Gameworks (The Evil Within, the forthcoming Ghostwire: Tokyo), the mobile game studio Alpha Dog (Monstrocity: Rampage). Both Master Chief and the Doom Slayer are now branded Microsoft.
Microsoft now owns 25% of the most successful game franchises. The gaming industry is growing more lucrative all the time.
“We believe the deal checks a lot of boxes for Microsoft, such as strengthening the Xbox/Games division product portfolio as competition increases, boosting the profile of Xbox subscription services, and providing more content for the company’s cloud gaming initiatives,” R.W.Baird analyst Colin Sebastian wrote in an investor note.
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