Microsoft Makes a Bold Move to Build the Metaverse With the Activision Blizzard Deal

Building the metaverse ain’t easy. But someone has to do it. Why not Microsoft?

On January 18, Microsoft announced an all-cash deal to acquire Activision Blizzard, the game development and interactive entertainment content publisher. This is a big move for Microsoft. The deal, if it succeeds, would give Microsoft a stronger foundation to build a metaverse that extends across multiple digital worlds. 

The promise of the metaverse is that human beings can use avatars to jump from one immersive environment to the next. Microsoft already owns one of those environments, Minecraft. Activision Blizzard gives Microsoft access to more of them through games such as Overwatch and Call of Duty. In a press release, Microsoft said, “This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.”

In a call with investors, CEO Satya Nadella said:

Our vision is for a river of entertainment where the content and commerce flow freely, driving a renaissance across the entire industry to make games more inclusive and accessible to all. And together with Activision Blizzard, that’s what we will be able to deliver. Removing these barriers will only become more important as the digital and physical worlds come together and the metaverse platforms develops.

When we think about our vision for what a metaverse can be, we believe there won’t be a single, centralized metaverse and there shouldn’t be. We need to support many metaverse platforms, as well as a robust ecosystem of content, commerce and applications. In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises, accessible on every device. And bringing fantastic entertainment together with new technologies, communities and business models is exactly what this transaction is about.

His point was that no company will dominate these immersive worlds, but that many software makers will create many different virtual worlds in the future. All that said, though, Microsoft wants to be one of the companies building and connecting those virtual worlds. 

Microsoft has already made strong inroads into building the business-to-business metaverse by making it possible for digital twins to operate in or virtual representations of real-world places such as factory floors. For example, Anheuser-Busch InBev has used Microsoft’s Azure Digital Twins to create a digital model of their breweries and supply chain. In 2022, Microsoft intends to make virtual communications more of a metaverse-like experience by introducing Mesh (a collaborative platform for virtual experiences) to Microsoft Teams. 

Consider now how Microsoft could build:

• A consumer-oriented metaverse (the focus of the Activision Blizzard deal). 

• A business-to-business metaverse (e.g., Azure Digital Twins).

• Virtual communication and learning (Mesh for Teams), which applies to business-to-business, business-to-employee, and any learning scenario (such as higher education).

To pull all this off, Microsoft would need to provide connected content and experiences. We know the company is loading up on content (in particular, gaming content) in the business-to-consumer space. A real proving ground will occur when Microsoft attempts to make Teams a better experience with Mesh – and success here is by no means assured. 

For Microsoft to truly build a connected metaverse, the company may need to change its practices. For instance, Microsoft sometimes makes its games exclusive to its own devices, such as its Xbox console. Metaverse builders connect, though. They don’t create wedges.

In the near term, Microsoft will be busy helping Activision become a better company, beginning with Activision’s culture. Activision is facing a reckoning right now after ongoing reports of sexual misconduct and harassment among the company’s executives led to the dismissal of dozens of employees on January 17. Microsoft needs to proceed carefully and in a mindful manner here. During an investor conference call, Nadell said, “The culture of our organization is my number one priority.” He added that “it’s critical for Activision Blizzard to drive forward on its” commitments to improve its workplace culture. Now Microsoft will be accountable for ensuring that Activision brings real cultural change.

Keep an eye on Microsoft. 

Note: I invest in Microsoft