MS aims to make as much $$ as possible. That does not necessarily align with being destructive of competition in the various markets they participate in. They make more $$ in the long run by helping grow the pie for everyone than they do by trying to hoard the slices available today.
The entire reason MS focuses on GP is because it gives them a potent and steady rev stream. Thatâs why all companies who do subscription services love that model. It allows them to have a huge cushion for taking creative risks which in turn drives adoption of GP and the Xbox ecosystem both.
You grow GP with big exclusive properties (exclusive to their sub service, not necessarily the hw platform). That requires big investments in 1P/2P/3P deals. ABK gets them a whole host of reliable and consistent and potent rev streams to provide that cushion, while also dramatically strengthening GP offerings, BC offerings, future 1P output and reaching gamers on other ecosystems. Also, ABK games wonât show up on other competing streaming or game sub services like Luna or Spartacus now, which is a huge benefit for GP.
So yes, it was not just for GP for sure. It was multithreaded and basically every angle imaginable benefits MS and their consumers in multiple ways. And all for $40bil below the market value on offer a year ago. A deal too good to pass up, Iâd say.
Nah they will still exist with or without the 3rd party exclusives. But it does elevate it
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Thatâs funny, because your analogy is great, but you still didnât get it right.
A lot of people buy houses as a investment and collect the rent, instead of living in it themselves.
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I believe some COD games may appear on Spartacus due to Sonyâs deal. Though it remains to be seen what content Sony will use to launch Spartacus with. If it is gonna be the same as now , then it will be no different from the current PS Now and PS+ just with different names.
It doesnât work that way.
Microsoft didnât âloseâ $68 billion, they bought an asset worth that amount.
If they would make it exclusive it would tank the value of the asset and hinder the revenue.
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Agreed. I hope my post isnât being misconstrued.
Even aside from money, the destruction of the competition is detrimental to Microsoft. This is why, as Jez pointed out, they helped Apple way back in the day. Even if, ultimately, Apple ended up getting crazy with it and how restrictive and selfish they are (especially in mobile where they hardly have real conpetition).
The inevitable annoucement of dropping XBL Gold isnât done more to harm Sony but instead to prop Game Pass up whilst raising the price without repercussions. It also aligns, like I previously said, with their PC and mobile push, and for equality within their ecosystem. However, the value proposition for free CoD vs $70 is already great, and then free multiplayer vs paid?
Yeah, I think Microsoft has many options to dominate with the ABK deal despite what people thinking short-term keep saying, which ultimately is great for Xbox gamers.
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I doubt Sony could have afforded what ABK would want to make that happen. I am not real bullish on Spartacus wrt the content Sony aims to go after from 3P.
This does seem a real good analogy actually. That recurring, reliable income and collateral property allows the landlords to take bigger risks on other property investments. Not the analysis the other person was looking for, but ya kinda nailed it, heh.
This was an interesting take on the whole Metaverse angle related to ABK. Some here might find it interesting
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Then how else it works?
They are paying the share holders 68 billion. They will have the asset. Then they will use it to earn money. It will take 27 years at worst ( assuming 2.5 billion profit each year from ABK) to make that money again.
Maybe you mean they replaced the money with some asset hence they didnât lose?
If I buy a million dollar house, I did not lose a million dollars.
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I think we all could have come up with ways that we would have rather had them spend $70 billion. I donât think itâs as easy as that though, and I also donât know if Microsoft would have spent 70 billion (or even 20 billion) if it wasnât for something as major as Activision.
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MS already made that $$ and that $68bil was sitting in a bank and was depreciating in value as time goes on. Spending it was smart on their part. Also, note that they got lucky on timing and saved around $40bil compared to the value of ABK from a year prior.
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As Tavish pointed out they exchanged one asset (cash) for another asset (Acti/Bliz). In the accounting world they still have 70B in assets with the entirely realistic expectation that the Acti/Bliz asset will increase in value. It isnt viewed as the are now -70 billion in some capacity. It is viewed as an exchange of 70 billion for a different asset worth 70 billion.
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These 70b is an investment. It might bring returns, might not. But it is better than just let the money lying around. They did not spend money thinking about âwe are gonna return these 70b from retail sales on Playstationâ
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Itâs not about getting a return on the individual investment of ABK . Itâs about growing the brand to get even bigger returns overall from Xbox. In their fiscal year of 2021 for the entire year of revenue (MS). They did $168 billion in revenue and their Net income (money that goes straight into the bank) was $61 billion. And after ABK do we think the Net income is going to go down? No, itâs only going to go up and the Net income they could have moving forward that Xbox will provide a nice boost to, will be enough to pay for an ABK acquisition or more every single year.
You bought that house for living or rent/investment?
Donât know why this is even discussed ⊠I never mentioned Microsoft lose that money. I even acknowledge the same thing by saying they replaced money with assets.
Donât know whatâs the disconnect here with everyoneđ€
Seriously, is it too much think about an acquisition from the point of view of how much it will take to make it return?
Imagine MS just letting xbox spend 70 Billions without conforming if they could bring back that much money back at some point?
If the new asset makes more money than that 70 billion would have made in interest then they are coming out ahead.
Thatâs free money for you. Basically imagine if you are earning 1m every month. After 10 months you have 10m. You continue to earn 1m every month but eventually you may want to spend - leât say - 5m out of 10m you have. And you wonât be concerned about the possibility of losing them. Because after one year you will get another 12m anyway.
Microsoft is able to do that because not only they have incredible profitability (around 45%) they also earn a lot. Like for example they got 20b in pure profit this quarter. And 45b in revenue. And this 20b is just a pure cash they can use for anything.
P.S. the fun thing is that technically they should earn even more the next quarter.