FirstFT: Microsoft makes huge gamble on video game industry

Microsoft yesterday unveiled its biggest acquisition under chief executive Satya Nadella, taking a huge gamble on the immersive future of the internet and the video game industry.

The purchase of Activision Blizzard for $75bn will make the X-box maker the third-biggest gaming company by revenues after China’s Tencent and Japan’s Sony. It adds Call of Duty, World of Warcraft and Candy Crush to Microsoft’s digital entertainment business.

It also moves Microsoft closer to Nadella’s vision of an integrated platform for video game distribution. He has previously suggested that Microsoft could become a “Netflix for gaming” — a single, subscription-based online service giving access to a wide array of exclusive content.

But the deal is not without risks. Activision has faced allegations of widespread sexual harassment. Bobby Kotick, Activision Blizzard’s chief executive, has been under pressure to tackle a “pervasive ‘frat boy’ workplace culture” at the Santa Monica-based company.

Kotick, one of the highest paid executives in the US, is unlikely to remain with the company once the deal is completed. Microsoft said yesterday its head of gaming would have responsibility for the business once the deal was approved.

The announcement sent shockwaves through the video games industry. Sony shares suffered their biggest fall since the start of the pandemic earlier today in Asian trading. Other gaming companies, however, saw their shares rise on the prospect of more dealmaking in the sector. Shares in Electronic Arts, whose titles include the Fifa and Madden sports franchises, rose more than 5 per cent, while Ubisoft, maker of Assassin’s Creed, rose 8 per cent.

Do you back Nadella’s bet? Email me at firstft@ft.com and thanks for reading FirstFT. Here’s the rest of today’s news — Gordon.

Five more stories in the news

1. AT&T and Verizon agree to limit 5G rollout The telecoms companies have said they will scale back their debuts of high-speed 5G technology across the US after eleventh-hour warnings from the aviation industry that it could interfere with aircraft safety and navigation systems.

2. Germany’s 10-year Bund yield turns positive for first time since 2019 The benchmark for borrowing costs across the eurozone has turned positive for the first time since 2019 as investors bet central banks would need to withdraw stimulus measures to slow inflation.

3. Goldman Sachs chief warns of ‘wage inflation everywhere’ David Solomon told the FT that “there’s no question that inflationary pressures around compensation had an impact” as a big jump in expenses hit fourth-quarter profits at the Wall Street bank. Goldman reported fourth-quarter net income of $3.8bn, down from $4.36bn last year.

4. Tech billionaire seals Spac deal amid Uyghur controversy A Spac backed by tech investor Chamath Palihapitiya has agreed an $825m deal to merge with a healthcare company focusing on kidney disease. The move comes after Palihapitiya stirred controversy by saying “nobody cares” about the Uyghurs in China.

5. EU should ban energy-intensive mode of crypto mining, regulator says A top EU financial regulator has renewed calls for an EU-wide “ban” on the main form of bitcoin mining and sounded the alarm over the rising proportion of renewable energy devoted to minting cryptocurrencies.

Coronavirus digest

• Bill Gates has issued a warning of pandemics far worse than Covid-19 as he called on governments to contribute billions of dollars to prepare for the next global outbreak.

• Cathay Pacific is offering bonuses of up to HK$29,000 ($3,700) to provide an incentive to pilots to fly into Hong Kong and stay in hotel quarantine for weeks as a survey shows US companies are struggling to fill senior roles in the city.

• Boris Johnson will embark on a fight for political survival today by announcing a lifting of Covid-19 restrictions in England as MPs in his own party claimed they were on the verge of triggering a no-confidence vote.

• Hong Kong announced the cull of more than 1,000 hamsters amid fears of transmission from pets to humans. How widespread is Covid in animals and what are the risks to humans? Our science editor explores the evidence.

The day ahead

Earnings Bank of America and Morgan Stanley are next in line among America’s big banks to release quarterly results. BofA is expected to report stronger earnings and revenue for the fourth quarter, while forecasts show Morgan Stanley’s bottom line probably came under pressure from a decline in trading income. Procter & Gamble, the company behind big consumer brands such as Tide detergent and Crest toothpaste, will also release earnings before markets open. After the bell it is the turn of United Airlines.

Economic data A report from the Census Bureau is likely to show that the construction of new homes in the US slowed in December, economists predict. Supply chain delays and inflation, particularly for the cost of lumber, are adding weeks to construction times for single-family residences, the National Association of Home Builders said on Tuesday.

Covid tests: The Biden administration will officially launch a website where Americans can order free at-home Covid tests delivered by the US Postal Service. The move comes after the White House faced criticism over a test shortage over the holidays as the Omicron coronavirus variant fuelled a rise in cases.

Ukraine tensions Antony Blinken, US secretary of state, meets Ukraine’s president Volodymyr Zelensky in Kyiv ahead of a visit to Berlin on Thursday and a reported meeting with Russian foreign minister Sergei Lavrov on Friday as diplomatic efforts to ease tensions between Moscow and the west continue. Meanwhile, Iran’s president is to fly to Moscow for a meeting with Vladimir Putin.

What else we’re reading

Blackstone’s new real estate play Rent-to-buy companies are hot property in Silicon Valley and on Wall Street. By far the biggest is Home Partners of America which was bought by Blackstone for $6bn last year. Home Partners presents itself in altruistic terms as a new path for ordinary Americans to become homeowners. Yet a Financial Times investigation suggests a more complicated reality.

Business leaders must play a better political role The western world confronts two great crises: a collapse in trust in our democratic political systems and a planetary environmental threat. Increased trust in governments suggests that state-driven solutions to these problems have at the very least a chance. But it is unclear, writes Martin Wolf, where business comes in.

Moscow’s sanctions-proofing efforts weaken western threats Moscow’s “Fortress Russia” strategy is likely to make US and Europe’s proposed sanctions less of a deterrent from invading Ukraine. However, the EU has not reduced its dependency on Russian gas, leaving the possibility for Moscow to retaliate by limiting supplies.

What we know about Evergrande’s ‘black-box’ restructuring The crisis at Evergrande, the world’s most indebted property company, reached a milestone in December when it officially defaulted after months of missing payment deadlines. But the rest of the saga could take years to unfold.

Books

Now that the headlines from last year’s COP26 climate change summit in Glasgow have faded, you might think attention to planetary havoc has drifted. Not so in the publishing world, where 2022 has begun with an absorbing crop of environmental books on everything from the polar vortex to veganism and, of course, global warming.