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Microsoft’s $7.5 billion purchase of game publisher ZeniMax Media shows another change in direction for Xbox

Microsoft lost the battle for the current generation console. With new consoles on the way, it is buying ZeniMax Media in order to bolster its next strategy, which revolves heavily around its Netflix-style game subscription service Game Pass.

Earlier this week on Monday, Microsoft announced it would be buying ZeniMax Media, the parent company of beloved video game studio and publisher Bethesda Softworks, among others The deal, the biggest acquisition in the gaming sector to date, is valued at $7.5 billion, and will be settled in cash This announcement comes about a month away from the release of the next generation video game consoles

Earlier this week on Monday, Microsoft announced it would be buying ZeniMax Media, the parent company of beloved video game studio and publisher Bethesda Softworks, among others. The deal, the biggest acquisition in the gaming sector to date, is valued at $7.5 billion, and will be settled in cash. 

“As a proven game developer and publisher, Bethesda has seen success across every category of games, and together, we will further our ambition to empower the more than three billion gamers worldwide,” said Satya Nadella, CEO, Microsoft. 

The studios to be acquired by the deal include Bethesda Softworks, Bethesda Game Studios, id Software, ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog, and Roundhouse Studios, with over 2,300 employees across them. Bethesda’s critically acclaimed and best-selling franchises include The Elder Scrolls, Fallout, DOOM, Quake, Wolfenstein, and Dishonored, among others. 

Microsoft expects the acquisition to close in the second half of fiscal year 2021. 

Graph: Statista

The timing of this announcement comes at a time when the next generation of video game consoles is over a month away. Microsoft will be releasing their new Xbox Series X and Series S models in the US on November 10th. The Playstation 5, Sony’s next-generation iteration, will release in the US on November 12th. 

In the Middle East, the Xbox Series X and S will also release on November 10th, whereas the PS5 will launch on November 19th.

This is important because initial responses on social media following the announcement voiced concern regarding the future of exclusive PS5 titles currently in development at the studios Microsoft will purchase. Microsoft top executive Phil Spencer later stated that in an interview with Bloomberg that future Bethesda titles will be chosen as Xbox exclusives on a “case-by-case basis,” while titles currently being developed for the PS5 will be honored as exclusives for Sony’s platform, such as GhostWire: Tokyo and Deathloop. 

Keeping up with PlayStation

Microsoft’s acquisition came as a surprise to many, especially given its timing. It could be seen as a way for Xbox to attempt to catch up to PlayStation’s large library of exclusive titles. Over the past decade or so, Microsoft’s console has lagged behind the Japanese console this regard, offering a limited but noteworthy lineup of franchises like Halo, Fabled, and the Forza series. To be fair, PlayStation has always had a certain advantage in having access to a massive pool of talented studios in home-country Japan. However, the console has also wowed with exclusive titles developed in the US as well, such as the Uncharted and God of War series, and Horizon Zero Dawn.

Looking back to the Xbox One’s early unveiling events, Microsoft had realized that it was operating at a handicap, and as a result promoted the console as an entertainment jack-of-all-trades as opposed simply a game console. This left some fans baffled at the timme, as most were looking forward to the games and tech improvements the console would bring as opposed to a pitch explaining why you should watch Netflix on your Xbox One. 

In terms of sales, the PlayStation 4 had left Xbox One in the dust with 108.9 million units sold as of May 2020, compared to 46.9 million (estimated) for the Xbox, as per Forbes.

Microsoft seems to be continuing in a direction quite different from PlayStation’s once more. 

For Microsoft, next-gen is about the Netflix-like Game Pass

“Instead of licking its wounds and trying to fight Sony yet again next generation, the Xbox division under Phil Spencer has taken a drastically different approach,” Kotaku writes, “What Microsoft wants most today is studios that will help boost its impressive Game Pass subscription service, its upcoming streaming platform, and its continued stabs at PC gaming. Developing big Xbox exclusives is no longer a priority for Microsoft, and in fact, the company decided in 2016 that it would release future games on both Xbox and PC. Soon enough, Game Pass will also be available on PC, and it wouldn’t be shocking to see Microsoft embrace Steam—or overhaul the Windows store—as it tries to reach the hundreds of millions of people who play video games on computers.”

For Microsoft, it seems its Game Pass service, a sort of Netflix-like subscription for video games, will be its focus for next-gen. We’ve already seen the rise and success of the ‘as-a-Service’ business model in all kinds of industries, and gaming is next. Microsoft said it has more than 15 million Game Pass subscribers currently.

“At an average of $10 per user, accounting for some $5 and $1 limited time signups and subscribers of the $15 premium Ultimate subscription, that’s more than $1 billion in annual subscription revenue,” the Verge reports. “If all goes according to Microsoft’s plan, consumers won’t be talking so much about which company has the better exclusive lineup or which brand ‘won’ the next-gen race. Instead, chances are you may own both consoles and maybe even a PC. Microsoft may not really care — so long as you keep giving it $10 a month for Game Pass.”