Microsoft Gaming CEO: We're Confident In Timeline For Closin...| MENAFN.COM

Wednesday, 25 May 2022 01:42 GMT

Microsoft Gaming CEO: We're Confident In Timeline For Closing Activision Blizzard Deal


(MENAFN- ValueWalk) Image source: CNBC Video Screenshot

Following is the unofficial transcript of a CNBC exclusive interview with Activision Blizzard, Inc. (NASDAQ:ATVI) CEO Bobby Kotick and Microsoft Corporation (NASDAQ:MSFT) Gaming CEO Phil Spencer on CNBC's“Squawk on the Street” (M-F 9AM – 11AM ET) today, Tuesday, January 18th. Following are links to video on CNBC.com:

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Activision Blizzard CEO Bobby Kotick: Metaverse Race Helped Prompt Microsoft Deal

Microsoft Gaming CEO: We're Confident In Timeline For Closing Activision Blizzard Deal

BECKY QUICK: Hey, good morning Carl. It's good to see you and guys, good to see all of you. We are talking about the big deal of the morning. This is a deal of Microsoft announcing that it's going to be buying Activision Blizzard . This deal actually values the company Activision at about $80 billion, if you consider the cash they have on hand that gets it back to about $68.7 billion. I'd like to welcome this morning Bobby Kotick and Phil Spencer. Phil Spencer, obviously the head of gaming at Microsoft. Bobby Kotick, the CEO of Activision. Gentlemen, welcome to both of you and thanks for being with us on this news of this big deal. I know there are a lot of questions that people have but I think first and foremost, it has to be, how did this deal come about? And Bobby, I'll start with you. This is a company where you've been the CEO for almost 31 years, started out with a company that you bought out of bankruptcy for $400,000. Now looking at a valuation again, this deal values it at about $80 billion. How did this happen? How did you get to this place?

BOBBY KOTICK: Well, look, we've had a partnership with Microsoft that goes back to the launch of the Xbox. We've had many conversations over the years about various forms of collaboration and as we've started to see the real competition and we're sort of at the beginnings of what the metaverse will be like, and in that race for the metaverse , it started to become apparent that there are a variety of resources and talent that we needed in order for us to be able to continue on that journey. And so, as Phil and I started to have those conversations, we realized that now was a perfect time for a combination.

QUICK: Phil, when did those conversations start and what kind of got you to the point that you're willing to commit this kind of money to a deal like this?

PHIL SPENCER: Yeah, well, as, as Bobby said, you know, we talk all the time about the future of this amazing business. 3 billion gamers on the planet today, people playing in all regions, creators coming from everywhere, and we're always sharing our strategy with our partners and talking to them about their feedback. I think we've always just had a good connection with the team at Activision Blizzard about where we're trying to go. But honestly, this is a deal that happened pretty quickly. Like I'd say we, we really had some formative discussions about this specific opportunity late in the year and we just felt like now was the right time to add the right resources and capability to both companies.

QUICK: Is now the time in part because Activision shares had been down? They were down about 27% for the year to date, did that make this an easier deal to kind of get your head around?

SPENCER: I think as Bobby said, when we look at the competitive set that's out there, we look at the importance to us at Microsoft gaming of people playing on mobile. We look at the coming Metaverse, the opportunities that we need with great IP. We really saw this as an amazing opportunity because gaming's continued growth over the years, Microsoft's big on gaming, we're continuing to invest here, and we see it as a real strong catalyst for us in the consumer categories.

QUICK: Bobby, there have been a series of reports in the Wall Street Journal that raised questions just about sexual harassment at the company and how it's been handled. The, those reports have kind of question whether you've really looked into some of these reports. What would you, what would you say to that?

KOTICK: Well of course, any issue of harassment or discrimination is something that I would take seriously and do. And like many companies today, we had some challenges, but we have worked through them. We are committed, I can tell you it's a focus of mine and we continue to improve the culture with the expectation of being the very best, most inclusive workplace culture.

QUICK: Hey Phil, just a follow up on that. This is something that you had kind of said at the time you put out a memo internally saying that you were concerned about these reports. My guess is you guys have looked into this and you feel good about this if you are going ahead with this deal.

SPENCER: Culture is a journey for any workplace it's something at team Xbox we've been focused on for, for quite a long time. Obviously going through the due diligence process, talking to the leadership team at Activision Blizzard about the plan they're already implementing, we look forward to supporting them in that plan through the closing of this deal. And then post close, we know that the most important thing to a creative organization is that the employees feel safe. They feel heard so they could do their best work. There's nothing that's more important to us.

JIM CRAMER: Alright, first Bobby, it's Jim, congratulations and great for you and shareholders.

KOTICK: Thank you very much, Jim.

CRAMER: Sure. Let me ask you a question about how many companies do you think are really in this business? Because a lot of people are saying big three, therefore going to be FTC issues. They're going to be concerned about concentration in gaming . At the same time, I've been saying that there's a gazillion companies in this business. And the idea that there's some sort of protection that's needed for gamers, it seems a little silly. How many people do you think are in the universe that are doing what you do?

KOTICK: Look, it's a great question. And I would say one of the motivations that we had for a partnership with Microsoft is the recognition of it's a, it's a big market, but there's enormous amount of competition, whether it's Tencent to AGS resources that are extraordinary and global footprint or Sony, or Facebook or Amazon or Apple or Google or Netflix or Disney. When you think about the race for the metaverse and for the more influence in gaming in the gaming ecosystem, we've now seen more competition than ever before. And then if you add to that all the tools that companies like Microsoft to make available, like a platform like Cloud, you now have user generated content that's competing in this marketplace. So, the competition has never been greater and it's coming from all forms.

DAVID FABER: Yeah, so let me follow up on this, it's David Faber, because even though it may appear and as Bobby just indicated that this is pro-competitive or certainly not an anti-competitive deal, given the current regulatory environment, it's not surprising to expect that it's going to get a very tough review. So, what gives you the confidence that you'll get through that review and what steps is Microsoft willing to go to to make sure that you get the approvals you need and are able to complete this deal in 2023.

SPENCER: Yeah, I think Bobby hit it very well. This is an incredibly competitive marketplace in the gaming space. The truth is the largest gaming platforms on the planet are the mobile devices out there, distribution on those contents, control on those devices. It's controlled by two companies. So you look at a company like Microsoft, and we're bringing together content and intellectual property to offset the, the distribution capabilities we don't have on mobile devices. This is our opportunity to fight to compete on the largest platform out there in gaming, which is mobile devices, that's critically important to us and also as Bobby said, we have more creators on our platform than we've ever had. We have games coming from all, we have games coming from big publishers like EA and Activision and Take-Two. But you also look at a lot of homegrown games from small teams that are able to reach global scale because of the distribution that they're finding on PC and gaming consoles. It's an incredibly vibrant space right now.

FABER: Bobby, you know, you talked briefly at the outset about how you got to this deal, but was it at all motivated by your desire or perhaps the internal problems that you were dealing with, with at the company or did it have nothing to do with that and secondarily, did you get a sense in the marketplace that there was anybody else there who might be willing as unlikely as it seems to pay even more than Microsoft?

KOTICK: Well, to answer your first question David, no, of course not. We, we've dealt, we're dealing with our issues culturally and making great progress there. Our focus has been figuring out when you look at the library of franchises that we have and the talent that we need and the resources that we need and you think about the resources that are going to be critical going forward, the cloud and really having a purpose built cloud, having AI and machine learning capability, having user experience and user interface capability, data analytics, and then a really, really big pipeline of talent, we're going to need to hire thousands of people over the course of the next five years to realize the vision that we have. And what we really realized when we were thinking about partners is that Microsoft has this great long history like we do that goes back to the 1980s in video gaming, they have the incredible resources, an incredible pipeline of talent, a culture that is aligned like ours for focus on creating a really great work experience. And so, while there were, there are a lot of other companies that would be interested in a company like ours, Microsoft was clearly the company that made the most sense.

QUICK: Hey Phil, so the stock price just watching this right now Activision shares at $85 which is kind of surprising. This is a cash deal. $95 the only thing you can guess is that people think there will be some regulatory back and forth. You know, maybe it takes a little while to get past the regulators with some of these things. Andrew Ross Sorkin had reported earlier that he was hearing that there was a $3 billion breakup fee. Is that the case? Because I would guess that means that that you all think you have this under control.

SPENCER: You know, we're confident in our timeline for getting the deal closed. We think it'll close in our fiscal year '23. We're planning for that. We're really looking forward to getting to work directly with the teams that Activision Blizzard. I think that's where all of our focus is right now working with Bobby to ensure that over the next 18 months during the close, the business continues to perform, that we're set up for that close where we can work directly together on the future of gaming.

QUICK: Well, let's talk about the things that you guys actually see, what, what promises you think there are from this. And Bobby, I'll start with you. We talked about the metaverse all the time, but I have to admit I don't really understand it. I don't know what it means. What do you need in order for your games to kind of translate into the metaverse ?

KOTICK: Well, if you think about really not the Neal Stephenson Snow Crash vision of the metaverse, but the natural evolution of what the metaverse as we believe it will be is a collection of communities that are anchored by franchises that will start with gaming, so whether it's a Call of Duty or World of Warcraft or a Candy Crush, those franchises that have hundreds of millions of players are going to be, form the basis for what ultimately we think will be this large, vast virtual world that's usable on any display device with a microprocessor. In order to get there though, and this is really a big part of the motivation of the transaction is that you're going to have to have a cloud that is purpose built for those kinds of experiences. And Jim pointed out a little earlier, cybersecurity is going to be much more important than ever before in the way that people are going to be able to interact with each other, but also to protect that personal information and I think Microsoft has done a better job of almost any company that I know of in really building out that cybersecurity capability. But so, when you think about examples of over the long term what that Metaverse will look like, there are things that Microsoft has like Teams, we will now actually be able to integrate the idea of audio and video while you're playing games and sharing your experiences. They have the beginnings of what will be an ultimately great greater economy like Minecraft where we'll be able to create content that both can be commercialized or shared and that will be all part of what will be this great virtual world connected by these franchises of games.

QUICK: Phil, let's follow up on that just a little bit. In terms of what you get with Activision, I mean I'm guessing part of it is the franchise games that they have. What, what do you kind of think is the most important part of this transaction and being able to build that out?

SPENCER: No doubt in my mind. The most important thing is the teams. The team, the creative teams at Activision Blizzard and King that have created some of the world's most beloved gaming franchises. That's the, that's the whole future of this deal. Yes, there's an amazing set of IP that Bobby and the team have built and acquired over the years, those are just great opportunity for us. But when we think about where this world goes, where gaming goes, where our opportunity is together, it's really about making sure those teams as Bobby's been talking about have the tools that they need to reach their creative vision, have the right culture in place to reach the creative vision, and frankly, have some context and technical capability that we can bring from Xbox and Microsoft to help them achieve that. Gaming has always gone through multiple transformations and I think we'll continue to see that Metaverse being another one that's upcoming, and I can't wait to get to work with those amazing teams when we think about where this future will go. The future will be written through the creators' lens and their eyes and their creativity and the great player engagement that's out there as we strive to reach the 3 billion people who are playing video games today.

QUICK: Phil, what do you think the biggest challenge is not just through moving through as you wait for this deal, but beyond that, what are the things that you are kind of anticipating that could be hurdles and how do you overcome them?

SPENCER: The hurdle in the entertainment space to me is kind of always the same. It's you have to reach the hearts of the players. We're not an activity that's about I must do something, gaming is entertainment. Entertainment is about customer choice, player choice. We put the player at the center of every decision that we do, whether it's about our subscription offering, our cloud offering, having a diverse set of content. It's one of the things I love about this deal. We get to go work with the teams at King and King has created some of the most amazing mobile franchises. It's not an area where we've had traditional strength at Xbox and Microsoft so when I think about going forward and the opportunity to work with those teams, listen to those teams, talk about our vision, refine our platform, and I think that's just going to be an incredible journey for all of us.

QUICK: Phil and Bobby, I want to thank you both for being with us today on a really big day with a really big deal, but we appreciate your time and we hope to see you both again soon.

KOTICK: Thanks for having us Beck. Jim, David, thank you guys very much.

QUICK: Thank you guys.

Updated on Jan 18, 2022, 12:04 pm

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