Microsoft’s splurge on Activision Blizzard could mainstream the metaverse

Microsoft’s $68.7B splurge on Activision Blizzard is huge news for gaming, but the company has also pointed to the impact on another market: the metaverse.

In a press release announcing the plan, the Xbox owner said the deal will “provide building blocks” for the metaverse. Satya Nadella, Microsoft’s chairman and CEO, reiterated the point in a letter to shareholders:

Gaming has been key to Microsoft since our earliest days as a company. Today, it’s the largest and fastest-growing form of entertainment, and as the digital and physical worlds come together, it will play a critical role in the development of metaverse platforms.

Bobby Kotick, the CEO of Activision Blizzard, further touted the metaverse.

“Our talent and our games are important components of the construction of a rich metaverse,” he said in a letter to employees.

If you’re cynical about their statements, I don’t blame you.

The metaverse buzz has been largely driven by Facebook — I mean, err, Meta — a company that desperately needs a makeover. The actual projects, meanwhile, range from glorified VR to dystopian nightmares.

That doesn’t mean the hype is going away. The opportunities for an embodied internet that blends real and virtual worlds are enormous — both for investors and users. Gaming could be the first step to fulfilling this promise. 

Not only can gamers monetize the metaverse; they can also become the early adopters who push it into the mainstream. 

Some metaverses arguably already exist in games. Nadella certainly thinks that’s the case. 

“If you take Halo as a game, it is a metaverse,” he told Bloomberg TV last November. “Minecraft is a metaverse, and so is Flight Sim. In some sense, they are 2D today, but the question is, can you now take that to a full 3D world, and so we absolutely plan to do so.” 

Xbox and Activision Blizzard are yet to make inroads into VR gaming, although Microsoft has produced the Hololens mixed reality headsets. The company’s metaverse could also draw on its established gaming business, professional services, and Azure cloud-computing platform. 

Indeed, analysts were bullish about this offering before the Activision Blizzard acquisition. 

“We would argue that Microsoft is extremely well positioned having almost all of the major capabilities required to deliver a metaverse platform today,” Bernstein analyst Mark Moerdler said earlier this month, according to MarketWatch. 

Those capabilities could now encompass Activision Blizzard’s catalog of games, 400 million monthly users, and nearly 10,000 employees. That gives Microsoft a big edge over rivals such as Meta. 

There’s only one fair way to settle the feud: arm Zuckerberg with an Oculus Quest 2 and Nadella with a Hololens, and send them to the metaverse for a duel at high noon.