Microsoft CEO argues that buying Activision Blizzard will help him build the metaverse

When Microsoft bought Activision Blizzard for almost $70 billion last month, the tech giant’s CEO Satya Nadella was quick to bring up the metaverse in his comments. “In gaming, we see the metaverse as a collection of communities and individual identities anchored in strong content franchises accessible on every device,” Nadella said. The company also noted the deal would “provide building blocks for the metaverse” in its statement.

But it still wasn’t quite clear where Nadella saw the link between building the metaverse and buying, in Activision Blizzard, a bunch of game studios and a huge catalog of intellectual property. Speaking to the Financial Times, Nadella has attempted to shed some more light on his thinking.

“Metaverse is essentially about creating games,” the Microsoft boss said, noting the common concepts and technology between a virtual meeting and a video game. “It is about being able to put people, places, things [in] a physics engine and then having all the people, places, things in the physics engine relate to each other.

“You and I will be sitting on a conference room table soon with either our avatars or our holograms or even 2D surfaces with surround audio. Guess what? The place where we have been doing that forever […] is gaming.

“And so, the way we will even approach the system side of what we’re going to build for the metaverse is, essentially, democratize the game building.”

Put that way, investing in game technology and tools makes sense. But where does owning StarCraft and Crash Bandicoot come into it? Asked what he expected people to be doing beyond gaming “inside this intellectual property that Microsoft is paying so much for,” Nadella pointed to the social and cultural dimensions of Forza Horizon 5 — a game that’s nominally just about racing cars.

“Think about how we’re able to tell even the story of car racing through a cultural lens,” Nadella said. “This entire new game that we produced is all about Mexico, and the Mexican setting and car racing […] You think ‘my avatar in Forza is my car’ and how I decorate it.

“To me, just being great at game building gives us the permission to build this next platform, which is essentially the next internet: the embodied presence. Today, I play a game, but I’m not in the game. Now, we can start dreaming [that] through these metaverses: I can literally be in the game, just like I can be in a conference room with you in a meeting. That metaphor and the technology […] will manifest itself in different contexts.”

The interview also touched on the regulatory scrutiny Microsoft’s acquisition of Activision Blizzard will face. Nadella dismissed concerns that it might be blocked on monopolistic grounds, noting that it would make Microsoft only the world’s third-biggest gaming company by revenue, behind Tencent and Sony.

“At the end of the day, all the analysis here has to be done through a lens of what’s the category we’re talking about, and what about the market structure? Even post-this acquisition, we will be number three with sort of low teens [market] share, where even the highest player is also [in the] teens [for market] share. It shows how fragmented content creation platforms are. And so, that’s the fundamental category. Yes, we will be a big player in what is a highly fragmented place.”