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๐ŸŽฎ Activision: What's the deal?

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๐ŸŽฎ Activision: What's the deal?

The FTC approval is still pending for the biggest tech acquisition ever

App Economy Insights
Dec 7, 2022
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๐ŸŽฎ Activision: What's the deal?

www.appeconomyinsights.com

Hello there! ๐Ÿ‘‹

Greetings from San Francisco!

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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.

Itโ€™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, weโ€™ll cover the following:

  1. Activision Blizzard Q3 FY22.

  2. Recent business highlights.

  3. Key developments in the acquisition process.


Source: Acquisition deck (January 2022)

If ultimately approved by regulators, the acquisition of Activision Blizzard wouldnโ€™t be just Microsoftโ€™s largest acquisition. It would be the biggest tech acquisition ever.

Here is a recap I tweeted when Adobe bought Figma in September.

Twitter avatar for @EconomyApp
App Economy Insights @EconomyApp
Largest tech acquisitions: Microsoft ๐Ÿ›’ Activision $69B Dell ๐Ÿ›’ EMC $67B Avago ๐Ÿ›’ Broadcom $37B AMD ๐Ÿ›’ Xilinx $35B IBM ๐Ÿ›’ Redhat $34B Softbank ๐Ÿ›’ Arm $32B Square ๐Ÿ›’ Afterpay $29B Salesforce ๐Ÿ›’ Slack $28B Microsoft ๐Ÿ›’ LinkedIn $26B Facebook ๐Ÿ›’ Whatsapp $22B Adobe ๐Ÿ›’ Figma $20B
9:25 PM โˆ™ Sep 15, 2022
118Likes28Retweets

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, letโ€™s discuss how Activision makes money.

First, I need to tell you about net bookings and MAU:

  • ๐Ÿ’ต Net bookings is the net amount consumers spend (digitally or physically) during a period. It excludes the impact of deferrals. Therefore, itโ€™s the best indication of the current growth profile of the company because it shows the actual money spent on Activisionโ€™s games.

    โ€œWhat the heck are deferrals?โ€ 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.

  • ๐Ÿ‘จโ€๐Ÿ‘ฉโ€๐Ÿ‘งโ€๐Ÿ‘ฆ 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:

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