Microsoft-Activision acquisition targets Google and Meta over Sony

The deal may help sell more Xbox Series X in the short term, but Microsoft has a bigger VR/AR fish to play.

Microsoft claims its recent acquisition of Activision Blizzard is more than just games: it will “provide building blocks for the Metaverse.” So while everyone was initially intimidated by the Game Pass exclusivity and whether Call of Duty would remain on the PS5 (it would), most didn’t notice that Microsoft’s ambitions went far beyond ties to Sony and Nintendo. traditional game console wars.

When I first read the announcement, I admit I groaned a bit. Since Facebook announced its own Metaverse initiative last year, it has been a buzzword for many companies. At CES in particular, companies claimed they built it without any real-world basis. It’s hard to take any metaverse project seriously when no one can agree on what exactly it is.

In this thread I’ll post all the ridiculous metaverse usages I’ve seen #CES.

— VR Nima (@NimaZeighami) January 5, 2022

Sometimes IP is more important than product.

As CEO Satya Nadella told Bloomberg last year, Microsoft “absolutely plans” to adapt its IP from traditional games to a “full 3D world.” VR/AR technology may not be ready for immersive Microverse, but Nadella has been hoarding IP such as Minecraft, The Elder Scrolls, and now World of Warcraft during his tenure as CEO. All of which can be easily rotated to different corners of a ready-player-style playground along the way.

Sony will just right With its Playstation Studios exclusives; as Microsoft itself stated in the press release, even with this acquisition, it lags behind Sony and Tencent in annual revenue. Microsoft could make a fortune with PS5 gamers playing Call of Duty, so why swagger?

Instead, I believe Microsoft’s acquisition of Activision will play a bigger role in the future mixed reality war with Google, Meta, Sony, and Apple. Microsoft isn’t well known in the VR/AR space, but it’s fighting a protracted battle by recognizing that sometimes IP is more important than product.

Microsoft-Meta takeover battle, FTC as arbiter

HP Reverb G2 running on Microsoft OS

On the surface, Meta and Microsoft are getting along just fine, and Microsoft recently agreed to bring Teams to the Quest 2 headset. But behind the scenes, they are competing for the same resources and market share.

In terms of talent, Microsoft recently lost 100 Hololens employees, most of which moved directly to Meta. The same goes for Apple, which lost about 100 engineers to Meta and started offering $180,000 in bonuses to its AR/VR engineers so they could stay. Meta is actively picking the best and brightest from its competitors.

Then you have to look at Meta’s frenzy of acquisitions of popular VR hardware and software developers, including Beat Games (Beat Saber), BigBox VR (Population: One), and Supernatural — the latter’s $400 million acquisition led to an FTC antitrust investigation . It even acquired a VR lens startup originally funded by Valve, which sparked another lawsuit.

Meta is doing what it can to cement its position as the VR/AR authority and keep other competitors from coming forward.Bloomberg even claims Activision is shopping for itself Yuan As a potential buyer before going to Microsoft, Microsoft is sure to fast-track the Call of Duty VR game on the Quest 2. But Facebook’s privacy concerns, coupled with Activision’s toxic workplace issues and increased FTC scrutiny, ensure it can never happen without causing chaos.

Instead, Microsoft will continue to support its gaming monopoly, just as Congress pushed through a major tech antitrust law. Going against the Activision Blizzard deal, as analyst Gene Munster recently suggested to CNBC, President Biden’s Federal Trade Commission could certainly choose to step in.

Whatever happens legally, the deal will give Microsoft access to more popular AAA exclusives, while Meta still relies mostly on talented indie developers for its success. if Microsoft could turn CoD, Overwatch, or Diablo into an engaging hybrid VR experience, as Sony did with its PS5 VR games, which could put it on the path to Metaverse’s success moving forward. That’s not counting Minecraft, Halo, its new Bethesda IP, and other existing assets.

Microsoft can’t push its “metaverse” without people using its VR platform.

The problem is that I don’t believe Microsoft can fulfill Nadella’s virtual world ambitions.Windows Mixed Reality (WMR) headsets like the HP Reverb 2 prove the company is taking software The VR side is serious, but looking at the recent SteamVR hardware survey, only about 5.5% of users own a WMR headset. The adoption rate of SteamVR is nowhere near that of the standalone Quest 2.

That is Where does Microsoft need to improve for this deal to matter. In my opinion, it has two paths to higher adoption, and neither involves wired VR. Either its PC-dependent headset needs a wireless connection, or it needs to release a standalone Windows device, like the rumored Valve Deckard headset, which appeals to more than just Windows users.

If Microsoft wants VR Game Pass to be a success, then all-in-one VR is the way to go. For that, it may have to rely on the cloud.

Stadia is more serious for Microsoft than you think

American soldier wearing Microsoft Hololens

Google and Microsoft are two VR/AR companies whose track records spark more pessimism than optimism. Google Glass and Microsoft Hololens have inspired some incredible hype that has fizzled out over the past six years with expensive enterprise editions.

Microsoft’s recent $22 billion Hololens contract with the US Army shows where its real priorities lie.Why Focus on Teen Call of Duty When You Can Get More Money actual Advanced warfare? The team is said to be stretched thin in supporting the contract, which doesn’t leave much room for anything else. As for Google, it’s spent far more time on smartphone AR, but hasn’t done anything exciting in years.

In this case, the Google Project Iris leak intrigued us, but worried about further disappointment. It’s a new AR/VR headset designed to resemble “a pair of ski goggles” that can “render some graphics remotely and stream them into the headset over an internet connection.” In other words, it could be designed independently using the power of Stadia cloud computing when it launches in 2024.

When it comes to gaming cloud computing, Google and Microsoft are the two leading players, giving them a significant advantage in portable AR. Whether the two can effectively exploit this advantage is another question entirely.

Stadia is underperforming in 2021, largely due to Google shutting down its game studio, but also due to a lack of exclusive games. But it’s still technically impressive and has a loyal following. Google has started licensing it to third parties like AT&T for their own cloud gaming purposes.it work, even if Google didn’t back it up with a major gaming acquisition.

The problem, of course, is that if you weigh Stadia against Xbox Game Pass cloud gaming, Microsoft wins. Xbox with hundreds of first- and third-party options for $15/month, or Stadia Pro’s 30+ free games, mostly older AAA titles or cute indie games, for $10/month? This is not a game.

Coupled with Microsoft’s monopoly consumption habits, even more A title on Game Pass, and Stadia-as-a-Service can’t keep up. But Stadia’s processing power as VR/AR, backed by all of Google’s favorite apps and ARCore and Google Daydream experiences? This will most likely lead to something special. Of course, assuming Google didn’t underfund and kill the Iris project, like it killed many promising projects…like Daydream.

Microsoft has enough exclusive IP to fill a pool and dive into Scrooge McDuck style, and its Azure expertise has turned xCloud into a perfectly serviceable platform (even if it doesn’t handle Halo Infinite perfectly). But with its Hololens team tied to the military business and no new VR/AR headsets in sight, it’s unclear if Microsoft will be able to tap into those resources for years to come.

Assuming Google applies its Android and VR knowledge to an exciting mixed-reality device with great apps and solid Stadia support running on 5G networks, while Microsoft puts its hands on PC VR and a $3,000 AR headset messing around with the device. In this case, Xbox VR/AR may struggle to get off the ground until Google and others have gained a foothold.

A takeover battle is coming

My colleague Jerry Hildenbrand argues that consumers have opted for the Apple and Google duopoly in mobile, making it impossible for competitors like Windows Phone (RIP) to succeed no matter how good the software is. why? Because developers stick to the Apple and Google Play app stores, people feel left out using any other device.

Microsoft has the killer app this time around. Now it just needs killer hardware.

So when it comes to VR/AR, the IP acquisitions of these behemoths could end up being as important as how well the hardware works. No small third-party VR device, no matter how cheap or innovative, would be successful if parents knew that the kids version of Minecraft VR or the teen version of Call of Duty: Warzone would only work on Microsoft headsets. Or, if AR devices become more commonplace in terms of productivity, people will definitely care if it supports Google Workspace or Microsoft Office 365 apps.

So over the next few years, VR and AR need to reach their full potential, and Microsoft, Sony, Meta, Google, Apple, and a few other competitors will continue to scramble to acquire as many assets as possible. Gaming IP, promising startups and mixed reality hardware will all be sold out. Unless the FTC or the EU step in and force these companies to stop.

In a few years, we’ll see whether a hardware or software advantage gives companies the edge in a monopolistic metaverse war.