FirstFT: Microsoft is making a huge bet on the video game industry

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

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

It also brings Microsoft closer to Nadella’s vision of an integrated platform for video game distribution. He previously suggested that Microsoft could become a “Netflix for games” – a unique, subscription-based online service providing access to a wide range of exclusive content.

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

Kotick, one of the highest-paid executives in the United States, is unlikely to stay with the company once the deal closes. Microsoft said yesterday that its head of games will take responsibility for the company once the deal is approved.

The announcement sent shockwaves through the video game industry. Sony shares suffered their biggest fall since the start of the pandemic earlier in the day in Asian trading. Other game companies, however, have seen their shares rise on the prospect of further deals in the sector. Shares in Electronic Arts, whose holdings include the Fifa and crazy sports franchises, grew more than 5%, while Ubisoft, maker of Assassin’s Creed, increased by 8%.

Do you support Nadella’s bet? Email me at [email protected] and thank you for reading FirstFT. Here’s the rest of today’s news—Gordon.

1. AT&T and Verizon agree to limit 5G rollout Telecommunications companies have said they will reduce their beginnings of high-speed 5G technology across the United States after eleventh-hour warnings from the aviation industry that it could interfere with aircraft safety and navigation systems.

2. German 10-year Bund yield turns positive for first time since 2019 The benchmark for borrowing costs in the euro zone turned positive for the first time since 2019, as investors bet that central banks would have to withdraw stimulus measures to slow inflation.

3. Goldman Sachs chief warns of ‘wage inflation everywhere’ David Solomon told the FT that “there is no doubt that inflationary pressures around pay have had an impact” as a sharp increase in spending hit the Wall Street bank’s fourth quarter profits. Goldman reported net income of $3.8 billion in the fourth quarter, up from $4.36 billion a year ago.

4. Tech billionaire strikes deal with Spac amid Uyghur controversy A Spac backed by tech investor Chamath Palihapitiya has reached an $825 million deal to merge with a healthcare company specializing in kidney disease. The move comes after Palihapitiya sparked controversy saying “nobody cares” about Uyghurs in China.

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

Summary of coronavirus

  • Bill Gates 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 offers bonuses of up to HK$29,000 ($3,700) to entice pilots to fly to hong kong and stay in hotel quarantine for weeks as a survey shows corporate America is struggling to fill leadership positions in the city.

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

  • hong kong announced the culling of more than 1,000 hamsters amid fears of transmission from pets to humans. What is the extent of Covid in animals and what are the risks for humans? Our science writer explores the evidence.

The day ahead

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

Economic data A Census Bureau report is expected to show new home construction in the United States 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 homes, the National Association of Home Builders said Tuesday.

Covid testing: The Biden administration will officially launch a website where Americans can order free at-home Covid tests issued by the US Postal Service. The move comes after the White House came under fire for a holiday testing shortage as the Omicron variant of the coronavirus fueled a surge in cases.

Ukrainian tensions US Secretary of State Antony Blinken meets Ukrainian President Volodymyr Zelensky in Kiev ahead of a visit to Berlin on Thursday and a meeting with Russian Foreign Minister Sergei Lavrov on Friday as diplomatic efforts to ease tensions between Moscow and the West are continuing. Meanwhile, the Iranian president is to fly to Moscow for a meeting with Vladimir Putin.

What else we read

Blackstone’s New Real Estate Game Lease-to-own companies are popular in Silicon Valley and Wall Street. By far the biggest is Home Partners of America, which was bought by Blackstone for $6 billion last year. Home Partners presents itself in altruistic terms as a new path for ordinary Americans to become homeowners. Yet a Financial Times survey suggests a more complicated reality.

Despite all the rent-to-own hype, an analysis by the FT raises questions about the business model © Joe Raedie/Getty

Business leaders need to play a better political role The Western world faces two major crises: a breakdown of confidence in our democratic political systems and a global environmental threat. Increased trust in governments suggests that state solutions to these problems at least have a chance. But it’s unclear, writes Martin Wolf, where the business comes in.

Moscow’s Sanctions Efforts Weaken Western Threats Moscow’s ‘Fortress Russia’ strategy is likely to make sanctions proposed by the United States and Europe less of a deterrent to invading Ukraine. However, the EU has not reduced its dependence on Russian gas, leaving room for Moscow to retaliate by limiting supplies.

What we know about Evergrande’s ‘black box’ restructuring The crisis of Evergrande, the world’s most indebted real estate company, hit a major milestone in December when it officially defaulted after months of late payments. 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 the planetary havoc has drifted. That’s not the case in the publishing world, where 2022 has started with an absorbing crop of environmental books on everything from the polar vortex to veganism and, of course, global warming.

Illustration of a stack of green books
Pilita Clark rounds up new posts about environmental havoc – and what we can do about it

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