The central role of the Game Pass subscription service in Microsoft’s overall gaming strategy cannot be overstated. CEO Satya Nadella described it as the company’s bid for the gaming industry’s equivalent of Netflix, and every acquisition Microsoft has made since has bolstered the Game Pass library to attract more customers.
Speaking on Yahoo Finance Live a few days ago, Wedbush Securities analyst Michael Pachter admitted he was wrong about the original Game Pass idea. He then said that the game subscription service could jump to 100 million subscribers once the deal with Activision Blizzard was completed.
A few years ago, Microsoft had a vision, which I thought was stupid, that they were going to offer a subscription service and everyone would pay them for the right to play games. And they just didn’t have very many games.
Then they started buying up and bought six independent studios, the largest of which is Obsidian. They are very, very good. But then they bought Bethesda, which is a giant studio, and now they’re buying Activision. When they’re done, they’ll be the fourth major game publisher in the US. So they will be gigantic and they will be able to actually support their Game Pass subscription.
Their vision for the future is: let’s get rid of the console. Let’s take advantage of the cloud and deliver games to any screen you have. And this potential market is 3 and 1/2 billion people. So I don’t think they will have that many Game Pass subscribers, but will they go from 25 million to 100 million? Yes.
Michael Pachter is indeed very confident that the nearly $70 billion deal will be completed regardless of the requests made by the FTC and other regulators around the world.
I can safely say that the FTC has no legal basis to dispute this. They can try. But the basis for the problem here is that if Microsoft completes the acquisition of Activision, they will be getting games from the Sony Playstation platform. And Microsoft has already blogged and tweeted that we won’t be doing that. We have contracts. We will honor them.
[…] watch out for October, nine months after the deal. This is sort of the time when the FTC has to fish or cut the bait. And if they don’t sue by the end of October, Microsoft will announce that it is going to close the deal by the end of the year. And then we’ll see what the FTC does. But I think that this deal will take place. I think it will close no later than January 15th. And I think the price is 95 bucks, hence my target price.
If the deal goes through, we’ll see if Game Pass gets the huge boost that Michael Pachter predicted.