According to the president of gaming at Microsoft, if the company doesn’t gain a presence on mobile, Xbox will find it difficult to survive as a worldwide brand.

Phil Spencer has reiterated prior statements that the $68.7 billion deal is primarily motivated by Microsoft’s plans for mobile gaming, despite the fact that the company’s proposed acquisition of Activision Blizzard is frequently framed as the Xbox maker seeking to purchase Call of Duty.

“The notion that Activision is solely focused on Call of Duty on console is a construct that might be developed by our console opponent,” he said on The Verge’s Decoder podcast (transcribed by VGC).

The Xbox CEO continued without mentioning Sony by name but made mention of the reservations the PlayStation maker has expressed to competition authorities who are now reviewing the purchase.

I’ve not heard that Nintendo has sent any objections about the deal, Spencer said.

While console and PC revenues have remained “relatively flat,” he claimed that over the past five or six years, all of the growth in the $200 billion global gaming industry has come from the mobile segment.

When asked about a recent statement Microsoft made to a regulator about being a minor role on PCs and mobile devices, Spencer responded, “I don’t think anybody needs that quote from us to understand how unimportant we are in mobile. Anyone who chooses to play a game on their phone would be able to view that on their own.

“And PC as well. Our trials and tribulations over the last five, six years in PC gaming are well kind of documented, and we continue to work at it, and I love the work that the Xbox app team has been on, and our PC studio is doing great work on PC, but it takes time,” he added.

He continued, “In terms of the Activision opportunity, and I keep saying this over and over, and it is true, it definitely starts with a view that people want to play games on every device that they have. And in a funny way, when you think about the installed base in phones, the smallest screen that we play on is actually the biggest screen.

“That’s just a situation where the business will eventually become kind of untenable, for any of us, if we don’t achieve relevancy as a gaming brand over time. Running a global business will be extremely difficult if we can’t locate clients on phones or on whatever screen that someone wants to play on.

According to Spencer, the console and PC gaming industries are both declining as a percentage of the broader gaming market since the whole industry is expanding while both are seeing relatively flat sales.

“And then when you look at the biggest gaming companies out there, Tencent being the biggest gaming company in the world, so much of their revenue comes from mobile, and then they put their business success that they’ve earned through the work that they’ve done into the market acquiring other studios at a very fast rate,” the author continued.

 

“That puts a lot of us out there who are perhaps traditionally segmented to one screen and one device in the position of, OK, if you play this out over 10 years, if console itself is not going to grow, and PC will grow in certain years and not [other] years, and mobile continues to grow, how do you continue to run the business and stay competitive with others that are out there either acquiring talent, building new business models, new distribution, or building new franchises?

 

“Meeting your customers where they want to play is vital if you’re trying to run an at-scale global gaming business, and increasingly, people are wanting to play on their mobile devices.”

Activision Blizzard reported this week that for the three months ending in September 2022, there were 368 million monthly active users. 240 million players were accounted for by Candy Crush developer King, 31 million by World of Warcraft and Diablo developer Blizzard, and 97 million by Call of Duty publisher Activision.

King has more players than all other Activision Blizzard divisions put together, and it also brings in more money. So, Spencer was informed, Microsoft is actually purchasing the Candy Crush company as opposed to the Call of Duty company.

Of course, he answered. Additionally, Call of Duty Mobile and Diablo Mobile, which are well-known titles with an Activision and a Blizzard presence and significant mobile players, are not included in the Candy Crush King total.

The record-breaking $12.7 billion Take-Two and Zynga merger that was completed earlier this year would be easily surpassed by the proposed $68.7 billion acquisition of Activision Blizzard, making it the largest deal in the history of the video game industry.

In exchange, Zynga agreed to host Grand Theft Auto: Vice City, Borderlands, NBA 2K, and BioShock alongside its wildly popular FarmVille and Words With Friends social mobile game franchises.

The same reason Take-Two looked at Zynga and thought we need to expand our mobile capability, according to Spencer, can be found in the entirety of what Activision Blizzard King does, where their consumers come from, and where they earn money.

 

“Activision Blizzard King, in my opinion, did a better job of achieving that earlier, unquestionably better than we did, and they’re now in a position where they have great PC franchises, great console franchises, and great mobile franchises. Their mobile capabilities are what really sets them apart for us.

By acquiring Activision Blizzard, Microsoft has announced ambitions to develop a “next generation game store” to compete with Apple and Google.

It suggested that Xbox would try to scale the Xbox Store to mobile devices in order to draw players to a new Xbox Mobile Platform by “building on Activision Blizzard’s existing communities of gamers.”
“However, a significant change in consumer behavior is necessary to move customers away from the Google Play Store and App Store on mobile devices. Microsoft aspires to encourage gamers to explore new things by providing well-known and well-liked content.

In the same interview with The Verge, Spencer stated that he is willing to promise Sony and authorities that Call of Duty will remain on PlayStation for a longer period of time than currently planned.