Microsoft made shockwaves across the gaming industry when it acquired Activision-Blizzard for an eye-watering $75 billion in 2023. The company hoped that its mammoth acquisition would help bolster its gaming catalog and increase subscriptions for Xbox Game Pass by a significant margin. That has yet to happen.
A new report from The Information, with comments from various industry shareholders, sheds light on how well Activision has served Microsoft’s goals. For starters, Game Pass’ revenue grew by 5.7% in the year to June, which is below the internal target of 11%. Following the service’s declining growth rate, it was dropped as a metric contributing to Microsoft CEO Satya Nadella’s pay in 2023.
However, the company’s stock has not seen any meaningful dips due to the same, as investors are more interested in Microsoft’s growth in the AI datacenter category.
According to the report, Microsoft was hoping that acquiring Activision would lure other game developers to rent its Azure servers, which hasn’t happened.
“[Activision] has been disappointing,” said Denny Fish, a portfolio manager at Janus Henderson Investors overseeing funds that include Microsoft stock. “It’s also a business that had some degree of consistency over, like, a three- to five-year period but was highly volatile from year to year, because you’re so dependent on the big releases like Call of Duty.”
Game Pass’ reported failure to increase interest in Xbox hardware investment is leading Microsoft to port its first-party games to competing platforms like the PS5. Some game developers are also choosing to skip Xbox or delay their games on the platform, due to technical difficulties working with the Xbox Series S.
Microsoft continues to release its premium first-party games into Xbox Game Pass for PC and console, offering $60-70 triple-A games to users for a fraction of the price. Xbox is set to present its first Developer Direct show in late January, showcasing Doom: The Dark Ages and other games. The company has also promised to bring “the best of Xbox and Windows together” in handheld PCs in 2025.
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