SAN FRANCISCO, CALIFORNIA – JUNE 23: Phil Spencer, CEO of XBOX, arrives at federal court on June 23, 2023 in San Francisco, California. Top executives from Microsoft and Activision/Blizzard will testify during a five-day hearing against the FTC to determine the fate of a $68.7 billion merger of the two companies. (Photo by Justin Sullivan/Getty Images)
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As Microsoft tries to convince regulators to approve its $68.7 billion acquisition of Activision Blizzardthe company is revealing some of the other ways it is looking to expand into the video game industry.
Microsoft Gaming CEO Phil Spencer testified in San Francisco on Friday that the company previously began talks with mobile game developer Zynga but ended without reaching an agreement.
The hearing, which began Thursday and will continue next week, came after the Federal Trade Commission obtained a temporary restraining order to prevent Microsoft from closing on Activision. The court agreed to maintain the status quo while it reviewed the FTC’s request for a preliminary injunction for the settlement.
“Much respect for the people at Zynga and what they built,” Spencer said at the hearing. “In the end, for our opportunity, we thought we needed to have something that was even bigger than what Zynga was, given our small initial foothold in the mobile gaming business.”
take two interactive, the publisher of Grand Theft Auto and other game titles, ended up acquiring Zynga in May of last year for $12.7 billion. Zynga was originally for the hit Facebook social game FarmVille, before eventually expanding into mobile gaming, largely through acquisitions.
Prior to Microsoft’s offer, Activision met with a financial firm to work on Take-Two’s purchase of Zynga, CNBC reported at the time.
Spencer did not say when Microsoft was in talks with Zynga, and the company did not provide further comment. However, Zynga said in a presentation last year, executives met in September 2021 with representatives of an unnamed “strategic acquirer,” which “expressed non-specific interest in acquiring Zynga.”
It was not the first time that Microsoft showed such interest. The company reportedly tried to buy Zynga in 2010.
In trying to get the Activision deal over the finish line, Microsoft says that even if the two companies do combine, the combined entity would be smaller than sonywhose PlayStation console competes with Microsoft’s Xbox, as well as the Chinese Tencent.
Spencer said Friday that mobile gaming represents a faster growth opportunity than PC and console gaming, where Microsoft earns most of its gaming revenue. Microsoft has tried to push cloud-based game streaming on mobile devices, but that effort has challenges. They include the smaller fonts on phone screens and the fact that smartphones don’t come with drivers, Spencer said.
Besides, Apple has gotten in the way of bringing Microsoft’s Game Pass library of video games to its App Store, he said.
Spencer said that after the company went to Zynga, she worked with Microsoft’s CFO Amy Hood to look for mobile opportunities. Activision was the largest publisher of mobile content and was already a longtime partner of Microsoft, she said.
Activision increased its mobile game portfolio with the 2016 acquisition of King, publisher of Candy Crush Saga. About 35% of the company’s $8 billion in Income 2022 it came from their King segment.
LOOK: The five-day hearing between Microsoft and Activision Blizzard begins