🎮 Activision: What's the deal?
The FTC approval is still pending for the biggest tech acquisition ever
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In January 2022, Microsoft (MSFT) announced it would acquire leading video game publisher Activision Blizzard (ATVI) for $95 per share (all cash), valuing the company at $69 billion.
The gaming company made headlines in the past few days following rumors that the FTC (Federal Trade Commission) might file an antitrust lawsuit to block the acquisition.
It’s an excellent opportunity to look at the company's recent performance and review where things stand for all parties involved (from Microsoft to Sony to regulators).
Today, we’ll cover the following:
If ultimately approved by regulators, the acquisition of Activision Blizzard wouldn’t be just Microsoft’s largest acquisition. It would be the biggest tech acquisition ever.
Here is a recap I tweeted when Adobe bought Figma in September.
Activision Blizzard itself is a result of many blockbuster M&A deals in the gaming world over the years. Here are the ones you should know:
2008 - Merger with Blizzard owner Vivendi Games ($18.9 billion).
2015 - Acquisition of Candy Crush maker King Digital ($5.9 billion).
2016 - Acquisition of Major League Gaming ($46 million).
Before we dive deeper, let’s discuss how Activision makes money.
First, I need to tell you about net bookings and MAU:
💵 Net bookings is the net amount consumers spend (digitally or physically) during a period. It excludes the impact of deferrals. Therefore, it’s the best indication of the current growth profile of the company because it shows the actual money spent on Activision’s games.
“What the heck are deferrals?” you might ask.
Deferred revenue in video games is like when you get a gift card.
When you buy a gift card, you're paying for something now, but you might use it later. In video games, deferred revenue works the same way. You might pay for a game today, but you don't get to play until the content is released in the future. That money is put into a separate account and held until the game is released. Revenue from the sale of virtual goods is recognized as the goods are consumed or over their estimated useful life.
👨👩👧👦 Monthly Active Users (MAU) is another metric you should know. It shows the overall size of the user base (in this case, the average number of individuals playing a game in a specific period). An individual who plays several games will count as several users.
Turning to the financials:
Revenue includes: