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Bethesda Acquired By Microsoft In US$7.5b Deal

by Donald Theriault - September 21, 2020, 9:14 am EDT
Total comments: 16 Source: Microsoft

For those keeping score at home, that's 1.875 Lucasfilms.

Gaming's largest privately held publisher is off the market.

ZeniMax Media, the parent company of Bethesda, has entered into an agreement to be bought by Microsoft for US$7.5bn. This would give Microsoft ownership of properties such as Doom, Elder Scrolls, Fallout, and Wolfenstein.

Details of updates made to business agreements from before the sale, such as Doom Eternal for Switch and the year of exclusivity of the upcoming Deathloop and Ghostwire: Tokyo on PlayStation 5, have not been updated.

UPDATE: In a statement to Bloomberg, Xbox division head Phil Spencer indicated ongoing agreements (including the previously mentioned exclusivity) would be honored and future support for non-Microsoft ecosystems would be determined on a "case-by-case basis".

Talkback

Ian SaneSeptember 21, 2020

So is the outcome of this going to be that Microsoft's game library improves or will it be a Rare situation where they just squander Bethesda and only accomplish keeping others from having them?

MS easily has the weakest first party lineup of the big three, and since third parties try to make games for all platforms whenever possible that made the Xbox One a very unnecessary system.  So I get why MS did this as it secures tons of valuable IPs as first party exclusives.  Of course it's all IPs in the grand scheme of things.  It ends up an expensive purchase if they can't get talented people to make those games.

Unfortunately this brings us that much closer to a situation like the film and music industry where only a few companies own almost everything.  That was probably inevitable, but frustrating just the same.

mereelSeptember 21, 2020

Microsoft owns DOOM now?! A part of me just died inside...

nickmitchSeptember 21, 2020

Quote from: Ian

So is the outcome of this going to be that Microsoft's game library improves or will it be a Rare situation where they just squander Bethesda and only accomplish keeping others from having them?

I'm hoping, for eveyone's sake, that it's the former.  MS seems to be doubling down on Xbox again.  And with their strategy of Xbox being a service, ironically, not tied to a box, exclusive software is going to be even more important for them.  They need big, AAA exclusives, and Bethesda can provide those.

KhushrenadaSeptember 21, 2020

Microsoft and its videogame endeavors are so strange. Here's a company that's never been market leader. Out of three consoles, its second is considered the most successful although that success is debatable depending on how it might be measured or looked at. Its hardware hasn't been all that exceptional and has a growing view of being unnecessary with so many of the games on the systems available on PC or the competitor's hardware. It has a handful of big name franchises tied to the brand (although these continuing studio acquisitions could change that) and a big reason for it entering the market (living room dominance versus Sony) no longer seems to be a factor 20 years later as tech and habits have changed.

I'd love to see actual figures showing the totals Microsoft has spent in console development and production (plus console repair), first party software development, third party deals, and studio acquisitions versus the profit from hardware and first party software. I just don't see how they've ever recouped any of their costs at this point. I don't get what their strategy going forward is or why they think it is worth still being invested in the video game market so heavily. It just seems like the strategy is throw money at the problem and that should eventually fix it. If Xbox wasn't backed by Microsoft's deep pockets, it probably have folded by now. I'd love to know the justification from Microsoft on why they aren't decreasing their money spent in the market especially as they keep pushing hardware to further drive up the cost of video game development which they'll be on the hook for with all these studios they've bought developing software for it.

LemonadeSeptember 21, 2020

This is some crazy news. But Im a fan of both Bethesda and Xbox, so Im ok with it.

MagicCow64September 21, 2020

Quote from: Khushrenada

Microsoft and its videogame endeavors are so strange. Here's a company that's never been market leader. Out of three consoles, its second is considered the most successful although that success is debatable depending on how it might be measured or looked at. Its hardware hasn't been all that exceptional and has a growing view of being unnecessary with so many of the games on the systems available on PC or the competitor's hardware. It has a handful of big name franchises tied to the brand (although these continuing studio acquisitions could change that) and a big reason for it entering the market (living room dominance versus Sony) no longer seems to be a factor 20 years later as tech and habits have changed.

I'd love to see actual figures showing the totals Microsoft has spent in console development and production (plus console repair), first party software development, third party deals, and studio acquisitions versus the profit from hardware and first party software. I just don't see how they've ever recouped any of their costs at this point. I don't get what their strategy going forward is or why they think it is worth still being invested in the video game market so heavily. It just seems like the strategy is throw money at the problem and that should eventually fix it. If Xbox wasn't backed by Microsoft's deep pockets, it probably have folded by now. I'd love to know the justification from Microsoft on why they aren't decreasing their money spent in the market especially as they keep pushing hardware to further drive up the cost of video game development which they'll be on the hook for with all these studios they've bought developing software for it.

Yeah, I've always found their foray into games kinda weird. The original Xbox would have been another 3DO if Halo hadn't happened to align. It always just seemed like something cooked up by a sweaty junior exec without any clear connection to Microsoft's core businesses or expertise, which resulted in them spending a ton of money on a boondoggle custom box that ended up neck and neck with the Gamecube. And then the 360, gifted the botched PS3 rollout, lost money for them despite its popularity because of the RROD, and then the Xbone pissed away even that Pyrrhic userbase advantage. And yet the division has fended off multiple shareholder revolts and MS leadership changes.

Even after all this time they don't have a clear aesthetic identity other than wrung-out HALOGEARSFORZA. (Their one big winner, Minecraft, is so agnostic as to be divorced from the Xbox brand.) I guess they've entered into an Uber-esque phase where they're trying to undercut their competitors with a steeply discounted game library service with the goal of . . . someday raising its price enough to be profitable? Especially after dropping nearly $8 billion on Zenimax? Or maybe this is just some brand loss-leader tech prestige thing now?

KhushrenadaSeptember 21, 2020

Quote from: MagicCow64

The original Xbox would have been another 3DO if Halo hadn't happened to align. It always just seemed like something cooked up by a sweaty junior exec without any clear connection to Microsoft's core businesses or expertise, which resulted in them spending a ton of money on a boondoggle custom box that ended up neck and neck with the Gamecube.

Man, I had a different post in mind when I was writing this and was going to say that Halo isn't even that big a deal anymore but now I've changed my mind. I've edited this post so that it doesn't really have much to add about the Xbox's early years.

I don't know how accurate these numbers are but I just went fast and loose with a Google search on lifetime sales and found this Wiki. According to it, the first Halo did 5.5 million, the 2nd was 8 million plus and the third was 14.5 million. As we know, the GameCube's big seller was Melee and when I compared the Smash Bros. series against Halo, they parallel quite a bit in sales. Again, going by that Wiki, Smash 64 did 5.5 million. A couple years later, Melee comes out and sells 7.41 million and sort of defines the Cube like Halo defines Xbox. The third game of Brawl comes out and sells 13.32 million. There would be a bunch of spin-off titles for Halo after this but in 2012 Halo 4 releases and sells 9.75 million. Meanwhile, Smash 4 is released and sells 9.59 million on 3DS and 5.37 million on Wii U. How much of the 3DS and Wii U sales were to the same customer is unclear but if we remove the Wii U sales on the basis that they mainly would have gone to the Nintendo hardcore who likely had a 3DS as well then the series are staying pretty equivalent. However, with the release of the Switch, sales have rocketed back up at almost 20 million. Even though the Halo series has sort of maintained a Smash Bros. level of sales and name recognition, I just don't see it taking off like that but I'm not going to discount its potential to get gamers to early adopt into the Xbox S.

Of course, at the end of the day, it is still one franchise. As history proved, Halo wasn't enough to make the Xbox a bigger competitor against the PS2 just like Melee wasn't enough to push GameCube sales higher. So, I guess it is smart for Microsoft to purchase other IP like this to bolster the big name franchises they can offer and control since they haven't been able to do much to create a lot of them on their own but their past history in purchasing Rareware should also be a warning that purchasing IP doesn't automatically mean high-quality system selling software is going to come from it.

Ian SaneSeptember 22, 2020

For their first two generations I felt like the Xbox brand was growing and it made sense for Microsoft to play the long game.  The first Xbox didn't come close to the PS2 but it was able to contend with Nintendo and it gained a foothold in the market.  For your first go where you planned to not make a profit to establish the brand that went quite well.  The Xbox 360's generation is a weird one because the Wii outsold the other consoles but it was like it wasn't even in the same market.  The Xbox 360 had the best third party support and appeared to be the console of choice for hardcore gamers.  I feel like if the casual audience didn't embrace the Wii that the Xbox 360 would have won that generation for sure, at least for the western market.  Coming off that generation you figure the Xbox One was a no-brainer for getting green lit.

But that should have been the time all the pieces fell into place and it didn't.  The Xbox One is the least relevant.  It's like the system you bought at launch but you regret that you didn't pick the PS4 instead.  Sony has the high-end console, Nintendo has the hybrid.  There really isn't room for a third product (and has there ever been?  Always seems like number three is struggling to hang on until the next gen).  And this isn't a new brand.  Xbox has been in the console business longer than Sega was.  By now I would figure if it was going to be profitable for them it would have happened already.  Maybe they're playing the REALLY long game where they feel they have enough money to survive longer than everyone else and will make a profit when they're the only ones left.

Discord.RSSSeptember 22, 2020

Quote from: Khushrenada

I'd love to see actual figures showing the totals Microsoft has spent in console development and production (plus console repair), first party software development, third party deals, and studio acquisitions versus the profit from hardware and first party software. I just don't see how they've ever recouped any of their costs at this point. I don't get what their strategy going forward is or why they think it is worth still being invested in the video game market so heavily. It just seems like the strategy is throw money at the problem and that should eventually fix it. If Xbox wasn't backed by Microsoft's deep pockets, it probably have folded by now. I'd love to know the justification from Microsoft on why they aren't decreasing their money spent in the market especially as they keep pushing hardware to further drive up the cost of video game development which they'll be on the hook for with all these studios they've bought developing software for it.

While I don't wanna be the corporate defender in here, Xbox has been profitable for a while now. In 2018 their gaming business cleared 10bn in revenue (about 1/11th of their then-market cap). I'm thinking they probably take a bath on hardware, but there's 90 million Xbox Live subscribers and 10m+ of those also pay for GamePass (source here).

Presumably the ZeniMax purchase wipes most of that revenue clean, and I don't think their sale of Mixer to Facebook was enough to subsidize the purchase. What it does do though, is up their studios from 15 to ~23, including one in Japan. It buys them a ton of middleware, some cloud tech, and several scalable engines, which they might like since the future Xboxes might be a range of devices. It denies current rival Sony several enticing exclusives in the future (Skyrim sold 30 million units, they just bought its sequel), pads the xCloud portfolio in another big blow to Google's Stadia, and it effectively raises the price of entry for "new" players in the market like Apple, Amazon, and TenCent.

This all shores up their position against both their current as well as their future rivals. I agree with you Xbox often seemed like a side-project which grew slightly too big to kill, but it's difficult to read this purchase as anything other than MicroSoft going all-in on gaming.

Quote from: Khushrenada

So, I guess it is smart for Microsoft to purchase other IP like this to bolster the big name franchises they can offer and control since they haven't been able to do much to create a lot of them on their own but their past history in purchasing Rareware should also be a warning that purchasing IP doesn't automatically mean high-quality system selling software is going to come from it.

These are valid concerns, MicroSoft has a tendency to buy companies, change their work culture and then run them into the ground (Skype, Nokia). Presently they seem to have quite a hands-off approach with regards to their recent game studio purchases, which admittedly leads to unfocused branding. We'll see how long they can keep themselves from tinkering too much with the creative processes.

Overall I'm not thrilled about this purchase, since it will surely result in some job losses in Bethesda's publishing arm at the very least, and it's another move towards market consolidation not unlike the film and record industry underwent. But I think MicroSoft have finally made up their mind to go all-in on gaming (which they're fast integrating into their Azure cloud business), so for them it could be a big win in the long term if handled well.

Quote from: Discord.RSS

It denies current rival Sony several enticing exclusives in the future (Skyrim sold 30 million units, they just bought its sequel), pads the xCloud portfolio in another big blow to Google's Stadia, and it effectively raises the price of entry for "new" players in the market like Apple, Amazon, and TenCent.

This all shores up their position against both their current as well as their future rivals. I agree with you Xbox often seemed like a side-project which grew slightly too big to kill, but it's difficult to read this purchase as anything other than MicroSoft going all-in on gaming.

I think this is very astute. This move affects not just current players in the field, but possible future competitors as well. It's not just about console gaming, but cloud gaming, and therefore the cloud business as well. If all we were talking about was physical Xbox Hardware, then it wouldn't make nearly as much sense to keep ploughing money into this venture. But for the past several years MS has been thinking about a different/more comprehensive battlefield altogether.

KhushrenadaSeptember 22, 2020

Quote from: Discord.RSS

While I don't wanna be the corporate defender in here

Too late!

broodwarsSeptember 22, 2020

I'm not a fan of this move. Microsoft and Sony picking up a studio or 2 every couple of years is one thing, but this is a major publisher that likewise owned a bunch of major developers. While I doubt that Microsoft will make Bethesda's games true exclusives overall (Bethesda just made way too much money multiplatform), I just don't see how such a massive consolidation in the industry can be a good thing.

Watch Sony respond by purchasing Square Enix next, probably the only remaining publisher in the business on the level of a Bethesda (2K would never sell).

ThePermSeptember 23, 2020

Quote from: broodwars

I'm not a fan of this move. Microsoft and Sony picking up a studio or 2 every couple of years is one thing, but this is a major publisher that likewise owned a bunch of major developers. While I doubt that Microsoft will make Bethesda's games true exclusives overall (Bethesda just made way too much money multiplatform), I just don't see how such a massive consolidation in the industry can be a good thing.

Watch Sony respond by purchasing Square Enix next, probably the only remaining publisher in the business on the level of a Bethesda (2K would never sell).

Can they please purchase Konami instead?  And then make Kojima the president.

KhushrenadaSeptember 23, 2020

Kojima almost killed Konami before and now you want to have him finish the job?

I don't think Sony has any interest in entering the gym or gambling businesses, quite frankly.

ThePermSeptember 24, 2020

Quote from: Khushrenada

Kojima almost killed Konami before and now you want to have him finish the job?

Death Stranding was not Silent Hills. I just want him to finish Silent Hills.

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