Microsoft checked out acquiring Zynga but opted to go larger

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SAN FRANCISCO, CALIFORNIA – JUNE 23: XBOX CEO Phil Spencer arrives at federal court on June 23, 2023 in San Francisco, California. Top executives from Microsoft and Activision/Blizzard might be testifying during a five day hearing against the FTC to find out the fate of a $68.7B merger of the 2 corporations. (Photo by Justin Sullivan/Getty Images)

Justin Sullivan | Getty Images News | Getty Images

As Microsoft attempts to persuade regulators to approve its $68.7 billion acquisition of Activision Blizzard, the corporate is revealing a few of the other ways it’s looked to expand within the video game industry.

Microsoft Gaming CEO Phil Spencer testified in San Francisco on Friday that the corporate previously opened up talks with mobile game developer Zynga but ended up not consummating a deal.

The hearing, which began on Thursday and can proceed next week, got here after the Federal Trade Commission gained a brief restraining order to maintain Microsoft from closing the Activision purchase. The court agreed to keep up the establishment because it reviewed the FTC’s request for a preliminary injunction for the deal.

“Quite a lot of respect for people at Zynga and what they built,” Spencer said on the hearing. “Ultimately, for our opportunity, we thought we would have liked to have something that was even larger than what Zynga was, given our very small starting space within the mobile gaming business.”

Take Two Interactive, the publisher of Grand Theft Auto titles and other games, ended up acquiring Zynga, in May of last 12 months for $12.7 billion. Zynga was originally for the Facebook hit social game FarmVille, before eventually expanding into mobile games, largely through acquisitions.

Prior to the Microsoft offer, Activision met with a financial firm to work on topping¬†Take-Two’s purchase of Zynga, CNBC reported on the time.

Spencer didn’t say when Microsoft was in talks with Zynga, and the corporate would not provide further comment. Nevertheless, Zynga said in a filing last 12 months that executives met in September 2021 with representatives from an unnamed “strategic acquirer,” which “expressed non-specific interest in an acquisition of Zynga.”

It wasn’t the the primary time Microsoft showed such interest. The corporate reportedly tried to purchase Zynga in 2010.

In attempting to the get Activision deal over the finish line, Microsoft says that even when the 2 corporations mix, the joint entity could be smaller than Sony, whose PlayStation console competes with Microsoft’s Xbox, in addition to China’s Tencent.

Spencer said on Friday that mobile games represent a faster opportunity for growth than PC games and consoles, where Microsoft gets the majority of its gaming revenue. Microsoft has tried to spice up cloud-based game streaming on mobile devices, but that effort has challenges. They include the smaller typefaces on phone screens and the undeniable fact that smartphones don’t include controllers, Spencer said.

Moreover, Apple has stood in the best way of bringing Microsoft’s Game Pass library of video games to its App Store, he said.

Spencer said that after the corporate went to Zynga, he worked with Microsoft finance chief Amy Hood to search for mobile opportunities. Activision was the largest publisher of mobile content, and it was already a longtime Microsoft partner, he said.

Activision grew its portfolio of mobile games with the 2016 acquisition of King, publisher of Candy Crush Saga. About 35% of the corporate’s $8 billion in 2022 revenue got here from its King segment.

WATCH: Microsoft-Activision Blizzard five-day hearing begins


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