MS Spent 81 Trillion on Blizzard... Games Become Big Tech's New Weapon [Im Juhyung's Tech Talk]

Big Tech Companies Pour Tens of Trillions into the Gaming Market
Gaming Grows into a Market Worth Hundreds of Trillions, Next-Generation Growth Engine
MS Ambitious to Realize Cloud Gaming through Game Pass
Golden Opportunity to Expand 'Azure' Cloud Ecosystem
CEO Nadella: "Content, Commerce, Apps... All Ecosystems Are Important"

Microsoft announced its decision to acquire the American gaming company Activision Blizzard on the 18th (local time). / Photo by Microsoft

[Asia Economy Reporter Lim Juhyung] The leading American IT company 'Microsoft' (MS) has acquired the gaming company 'Activision Blizzard,' well known for games like StarCraft. The proposed amount reached a staggering $68.7 billion (approximately 81 trillion KRW), marking the largest deal in gaming industry history.

Recently, IT companies including MS have been pouring tens of trillions of won into the gaming industry. Having enjoyed high growth rates and emerging as a global entertainment industry, gaming is now also recognized by big tech companies as the 'next-generation growth engine.'

Satya Nadella, MS CEO, announced the acquisition of Activision Blizzard on the 18th (local time). With an acquisition price far exceeding 81 trillion KRW, MS will own popular game intellectual properties (IPs) held by Activision Blizzard, such as 'Call of Duty,' 'World of Warcraft,' 'Diablo,' and 'StarCraft.'

CEO Nadella emphasized, "Gaming is the most dynamic and exciting platform," adding, "It will also play a key role in developing metaverse platforms."

MS's acquisition of Activision Blizzard is the largest in gaming industry history. However, the battle among giant companies to acquire game studios has already been intensifying. The American comprehensive gaming company 'Take-Two Interactive' acquired the mobile game company 'Zynga' for a whopping $12.7 billion (approximately 15 trillion KRW) on the 10th.

Moreover, MS had already spent billions of dollars on game studio mergers before this corporate merger. In 2020, MS acquired ZeniMax Media, the parent company of Bethesda Studios known for games like 'The Elder Scrolls,' for $7.5 billion (approximately 8.95 trillion KRW). The gaming market has thus become a mega market where sums around 10 trillion KRW are exchanged.

MS is not the only IT company showing enthusiasm for the gaming market. Amazon, the largest e-commerce company in the U.S., has established its own game studios and made massive investments. Google also launched 'Stadia,' a cloud server-based gaming platform.

Amazon Games has studios in major global cities such as New York and London, and is making massive investments. / Photo by Amazon Official Website Capture

Why have big tech companies decided to make such bold investments in the gaming market? First, the gaming industry currently boasts unstoppable growth rates and has become a market that cannot be ignored. According to global market research firm Newzoo, the worldwide gaming market size reached $180.3 billion (approximately 214 trillion KRW) last year.

Especially positive is the fact that while other service industries have struggled due to the global COVID-19 pandemic, the gaming industry has shown stable growth.

However, the reason big tech companies have adopted gaming as their next growth engine is not simply because of market size. Looking closely at what MS aims to achieve through the gaming industry, one can see how gaming content is organically connected to MS's entire business.

MS's gaming industry revolves around the gaming console called 'Xbox.' Xbox competes with various consoles such as Sony's PlayStation and Nintendo's Switch from Japan.

Recently, Xbox introduced a new system: a subscription service called 'Game Pass.' In Korea, for a monthly fee of 7,900 KRW, users can enjoy unlimited access to all game software registered within Game Pass. Additionally, when purchasing games not included in Game Pass, users receive discounted prices.

Microsoft's gaming console series 'Xbox' / Photo by Microsoft

In other words, it can be described as the Netflix service of the gaming industry. Traditionally, games were played by paying for the software and then downloading it via CD or digital download to one's PC or gaming console. However, Game Pass has completely changed this paradigm. Consumers can enjoy numerous games by paying a small monthly fee, and developers can generate stable income, allowing them to focus on creation.

MS's ambition for Game Pass does not end here. MS is currently building the 'Xbox Play Anywhere' service. Play Anywhere is a feature included in the 'Game Pass Ultimate,' which sells for 16,700 KRW per month, allowing users to play games directly on a web page without downloading them.

This technology is implemented through cloud servers. Instead of game software running on PC or console hardware, the game operates on MS's cloud computing servers and is streamed to the user's screen. When the user inputs control commands, the signals are instantly reflected on the cloud server. Just as videos can be watched anytime on the Netflix website without downloading, Play Anywhere means users can freely enjoy any game on various devices such as PC, console, and mobile.

Xbox's 'Game Pass Ultimate' plans to offer a game streaming service. It is currently known to be in beta testing. / Photo by Xbox website capture

Unlike videos, games require quick user response and control sensitivity, so cloud-streamed games must support powerful communication functions. MS owns 'Azure,' the world's second-largest public cloud with a 21% market share. Its in-house research and development capabilities are unmatched.

This is where synergy between Game Pass and MS's cloud division occurs. By acquiring popular game studios and attracting numerous users to Game Pass, MS not only sells game software but also encourages users to utilize its core business, cloud services.

According to IT market research firm Canalys, as of the third quarter (July to September) last year, Azure's cloud market share was 21%, trailing the leader Amazon AWS (32%) by 11 percentage points.

Microsoft owns 'Azure,' the world's second-largest cloud service by market share. Photo shows a Microsoft data center / Photo by Microsoft website capture

Amazon has expanded its cloud ecosystem by integrating AWS with logistics automation systems and selling these solutions to other e-commerce and delivery companies. This has made it difficult for MS Azure to close the gap with AWS. As a solution, MS plans to grow Azure through the vast number of game users attracted by Game Pass.

Regarding this, CEO Nadella emphasized the importance of gaming during a conference call held immediately after announcing the acquisition of Activision Blizzard on the 18th. He stated, "There is no centralized single platform, nor should there be," explaining, "We must support numerous platforms."

He added, "A robust ecosystem of content, commerce, and applications is important," and "The metaverse of gaming is a place where strong content franchises, communities, and individuals reside, and all devices must be able to connect."

In other words, gaming content will become a community where MS users gather and a driving force that unites and advances all of MS's IT solutions. This is why 'electronic entertainment' is being recognized as more than just a leisure culture but as a new weapon for big tech companies.