Microsoft CEO Satya Nadella. Photo by Bloomberg.

Microsoft’s Big Activision Bet

Photo: Microsoft CEO Satya Nadella. Photo by Bloomberg.

Bobby Kotick could be the star in a fun new videogame we’ll call The Great Escape: how a CEO extricates himself from a scandal over his handling of sexual harassment allegations by selling his company. Not only does the Activision Blizzard CEO get to keep his job until the deal closes—at least a year from now—but the value of his stock just rose more than $105 million. He's a winner, but then, so is Microsoft: By striking a deal after the scandal cratered the stock by nearly 40%, it gets the company without overpaying. 

And that matters. When it comes down to it, Microsoft is spending $68.7 billion in cash to improve the portfolio of games available on its subscription gaming service, Game Pass. That’s a very pricey way of making Game Pass more viable, although, to be fair, Microsoft isn’t the first to have taken this tack. Disney, for instance, paid even more—$69.5 billion—for 21st Century Fox’s entertainment businesses, in large part to give it more horsepower for its video-streaming service, Disney+. Still, this is a high-risk strategy, whoever is doing it. All-you-can-eat subscription streaming services have squeezed the profits that can be made from entertainment, and the same thing is likely to happen in videogames. (For our analysis on the deal, see here and here).

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