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One Crazy Prediction if Microsoft's Acquisition of Activision Blizzard Falls Through

If gaming's most expensive merger is killed by European and British regulators, which acquirers come into play for Activision Blizzard?

It’s been a busy week for Microsoft and Activision Blizzard as the two companies inch closer and closer to what feels like the completion of their merger.

Microsoft took out ads in British newspapers, as it fights the United Kingdom’s Competition and Markets Authority, touting its recent deals with Nintendo and Nvidia to bring “Call of Duty” its services, should the Activision acquisition go through. Meanwhile, Activision Blizzard’s chief communications officer, Lulu Cheng Meservey, took to Twitter to accuse PlayStation CEO Jim Ryan of stating openly his intent to block the Microsoft-Activision Blizzard merger in meetings with European regulators in February. (Cheng Meservey is a former executive and now an advisor to Substack, the host and partner of this publication).

After Xbox head Phil Spencer previously stated that the Microsoft-Activision Blizzard deal would close before the end of this quarter, the fate of the deal stands before three regulating bodies in the U.S., Belgium and the U.K.

I generally feel quite positive that the Microsoft-Activision Blizzard deal will go through. Sony’s argument about how it will hurt the market isn’t well-founded—especially in a sea full of so many other game developers. The gossip among Activision’s orbit is that if the European Union and the U.K. CMA approve of the merger, it’s expected the U.S. Federal Trade Commission will fall in line and won’t start a separate fight.

But on the off-chance the deal collapses, the question becomes: Does Activision try to sell once again, and if so, who is the new acquirer?

Here’s a wild prediction: The Kingdom of Saudi Arabia.

Over the past three years, the Kingdom has made an aggressive push into the gaming space as it attempts to diversify its revenues from simply oil and gas, as well as launder its reputation to audiences less educated on geopolitical politics. Gaming’s not alone in that pursuit—the Saudi government has invested in pro wrestling, golf and Formula 1 during the same span—but it’s clear that gaming is a priority to the Kingdom.

In the past week, the Saudi government announced its latest acquisition. The ESL FACEIT group bought Vindex, the parent company of esports tournament organizer Esports Engine. In January 2022, Saudi Public Investment Fund subsidiary Savvy Gaming Group acquired ESL and FACEIT, then separate companies that were competitors, and merged them together. Now with Esports Engine, a competitor to those two companies, in tow, the Saudis own nearly all of the esports ecosystem outside of leagues backed by the game publishers, such as those ran by Riot Games and Activision Blizzard.

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The Saudi push into more general gaming has been well-documented, too. In June, the Savvy group invested $1 billion into Embracer Group, the company that now owns video game rights to “The Lord of the Rings” and “Deus Ex,” in return for an 8.1 percent stake. It also acquired stakes in Rockstar and 2K Games parent Take-Two, Electronic Arts and, you guessed it, Activision Blizzard, in late 2020. Its Activision stake, which cost the Kingdom roughly $1.4 billion, accounts for about 1.8 percent of the company.

Acquiring the other 92.2 percent may seem far-fetched—and it would certainly be quite expensive (the Microsoft deal is $68.7 billion). Activision Blizzard might, after all, remain independent should regulators nuke the Microsoft deal. But it’s hard to imagine that, as it’s clear that the current leadership at Activision Blizzard is prepared to get its payout and move on.

Few companies in gaming hold as much power as Activision Blizzard. Because of its senior leadership, particularly CEO Bobby Kotick, whose Rolodex is extremely large, Activision sits at what feels like a middle point between old media and new media. Presumably, if the company doesn’t come under Microsoft control, Kotick would remain longer, and having him in the pocket of the Saudi government would pay dividends for the Kingdom and its aspirations.

Right now, the bulk of the Savvy-controlled assets exist in esports, which is experiencing what some call a “winter.” Simply put, venture capitalists and other investors made insanely overvalued bets on esports that haven’t paid off. The audience size is smaller than once predicted. And the Saudi-backed group, with its near-endless pit of money, is taking advantage of the opportunity to snatch up companies vital to the esports ecosystem.

But there’s a negative point of view there, too: If esports doesn’t go through a resurgence, then what value do ESL, FACEIT and Esports Engine provide to the Saudi Arabian government?

There’s an obvious answer: influence and the laundering of the state’s reputation. Because it does one good thing—help independent esports survive—it can’t be critiqued for all the harm it’s done to LGBTQ people in the country or the dissident journalist it murdered. At least not by the people who sit atop the esports industry.

But to me, someone who has covered the inner machinations of the esports for nearly a decade, I don’t see the Saudis dabbling in esports as influential on a larger scale.

Owning a game developer, however, is a different story.

Gaming is growing every single year. Once a niche hobby, gaming is no longer one anymore. Ask anyone you know under the age of 30 if they play games. Chances are the answer is yes, whether that be more serious PC gaming or just a mobile game. Billions of people around the world play video games, and the ability to access them is extremely valuable.

Activision Blizzard is uniquely positioned as a developer that has it all. It touches the most hardcore of gamers—the computer nerds—with games like “World of Warcraft” and “Diablo,” to the more casual console player with “Call of Duty,” to those who only play on mobile, with titles like “Candy Crush.” If purchased by the Savvy group, it’s not likely that a game developer would be pushing Saudi propaganda inside of the games themselves. But owning Activision Blizzard would make the Saudis a power player in a budding industry and the largest in entertainment.

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