Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Microsoft, Activision and the metaverse
It didn’t take long for Microsoft (NYSE:MSFT) to pounce in 2022, with management announcing that it would be acquiring video game producer Activision Blizzard (NYSE:ATVI) for US$68.7 billion. Naturally, the news sent Activision’s share price jumping, in what was otherwise and extremely difficult market for all things technology.
With a market capitalisation of over US$2 trillion, not much moves the dial for Microsoft, which has become the dominant provider or everything from productivity software to cloud computing and console gaming. Yet this deal marks an interesting sidestep for CEO Satya Nadella, and comes shortly after news that Activision was being investigated over culture issues in the Los Angeles offices.
In the simplest comparison, Microsoft would quickly become the third-largest video game maker in the world, just behind Chinese giant Tencent and Japanese conglomerate Sony, which owns the PlayStation brand. And this is a good market to be in, with the industry hitting $200 billion in recent years and outpacing growing in traditional media consumption.
According to Microsoft, video game releases were up 64 per cent in 2020, with some 3 billion people around the world playing games on a daily basis, a number expected to double within the decade. Clearly, Microsoft wanted to make sure it was getting their fair share of the ballooning pie.
Speaking to a client this week, there is a clear divide between the gaming community, which seems to hit around the 36-year-old mark, with those moving on to children and the like, and those younger holding onto their youth. Activision has been one of the most popular brands for this older generation of games, almost solely due to its ownership and control over the Call of Duty ® franchise. Sales of the title represented some 55 per cent of the entire profit of the Activision unit in 2020.
But it also owns a number of other popular brands including Overwatch, Guitar Hero, World of Warcraft and Star Craft, which were early winners of the massive multiplayer online role playing game boom. Most importantly, it owns phone platforms including the uber-popular Candy Crush Saga franchise.
In the first instance, Sony Playstation owners were concerned that Microsoft may remove popular titles from the platform, however, it is clear that it is looking at something bigger. Just like Facebook when it renamed their business to Meta Platforms, Microsoft is staking its claim for a role in the metaverse. In its view, gaming ‘will be the forefront of the development of the emerging metaverse’.
Depending on your age and interest in all things technology, this may well be highly confusing. But put simply, the metaverse is essentially a collection of virtual worlds in which gamers of all ages and experience can interact, compete, shop, hold meetings and even do business without leaving the comfort of their own home, or pyjamas.
It sounds crazy to many, but the opportunity is real, with some experts predicting the sector to represent anywhere from US$10 to US$30 trillion in annual revenue within the next 10 to 15 years. The key of course, in the metaverse, is having or owning the platform on which the millions of people want to interact. This is ultimately what Microsoft is seeking to do.
