Why Microsoft acquired Bethesda (and why Bethesda sold)
Bethesda #Bethesda
Let’s answer the big question first: Why did Microsoft acquire Bethesda and its parent company, ZeniMax?
Microsoft sells video game consoles, personal computers, operating systems, and software subscription services. People will be more likely to acquire these Microsoft products if their favorite games can only be played on said platforms, or if the games are available everywhere but are optimized for Microsoft’s platforms, Windows PC and Xbox.
Bethesda produces some of the most popular franchises in the history of video games, including The Elder Scrolls, Fallout, and Doom. If Microsoft wanted to acquire a ton of beloved properties with one purchase, then it found the perfect publisher.
It’s really that simple.
Why did Bethesda sell to Microsoft?
I can’t tell you why Bethesda would sell with any certainty. We’ll have to wait for reporting on the motivations of individual board members. I can, however, tell you what’s publicly known about the state of Bethesda and its parent company, ZeniMax.
In 2020, the ZeniMax board has found itself in an unusual position. Its members include entertainment lawyer Michael Dominguez, retired baseball star Cal Ripken Jr., and film director Jerry Bruckheimer. The board members are older and have their own investments and businesses outside the video game space, but despite video game forum speculation, neither of those factors register as key motivations to sell — plenty of companies are run by older people who are not personally invested in the company’s industry.
Here’s what’s more concerning: The ZeniMax board also includes former CBS chairman Les Moonves, who resigned from that position in 2018 following multiple allegations of sexual harassment and abuse. And the late Robert Trump also served on the board, until his death in August. (A question I can’t shake: Where will Robert Trump’s cut go? To his heirs? Or, since the seat doesn’t appear to have been filled since his death, will the portion be carved up among other board members? There’s a book’s worth of intrigue!)
Pair this turmoil with the performance of recent video game releases.
Bethesda’s marquee video games have struggled in the back half of this console generation, beginning in 2016 with the underperforming Dishonored 2. In 2017, the company shipped the much-delayed Prey, along with The Evil Within 2, neither of which found massive commercial success. The online iteration of the Fallout series, Fallout 76, debuted in 2018 and is still trying to find its sea legs nearly two years into its existence. Video game publishers keep their sales numbers quiet barring tremendous success, so it’s tough to say how well Rage 2, Wolfenstein 2, or Wolfenstein: Youngblood performed, though the sales information that made it to the public wasn’t promising, to say the least.
The company has had the occasional success, like this year’s Doom Eternal, but some of Bethesda’s biggest releases have been ports and VR adaptations of the now 9-year-old Skyrim. Its biggest upcoming games — the very-long-in-development Starfield and the feverishly anticipated new Elder Scrolls game — don’t have release dates, and have been rumored to be years from completion.
Is Microsoft a good fit for Bethesda?
I’ll say that it’s a strange fit, going off Microsoft’s most recent acquisitions.
Since 2018, Microsoft has acquired several game developers separate from the collection of Bethesda studios. These studios, broadly, have focused on projects smaller than the typical AAA release. Until today, I’d assumed Microsoft planned to create more games, albeit smaller ones, incentivizing players to maintain their Xbox Game Pass subscription with a reliable stream of new releases.
Outside the acquisitions, even Microsoft’s biggest releases tend to feel more calculated and less expensive than their Sony counterparts. Compare the latest Gears of War titles and Halo Infinite with projects like The Last of Us Part 2 or 2018’s God of War.
I’ve never thought of Microsoft as a publisher to spend and lose lots of money on mega-expensive blockbusters. The company has recently presented itself as the practical publisher, with no better example than its acquisition of the reliable but not-particularly-exciting-anymore Minecraft.
Bethesda is the opposite brand of game creator. Bethesda has historically made humongous bets on expensive games, making its money back (and more) by selling its most successful games on every platform possible, then selling remasters, remakes, and VR spinoffs.
I struggle to imagine Microsoft making back the budgets of games like Starfield and the next Elder Scrolls by making them Xbox exclusives. That said, Microsoft doesn’t seem interested in Xbox exclusives anyway. Just this month, Microsoft released another first-party game on the Nintendo Switch; it launched Xbox Game Pass for PC; and it granted public access to its video game streaming service, xCloud, which allows subscribers to play a bunch of “Xbox” games on Google’s Android devices. In the past year, Xbox evolved from a console to a brand.
So Microsoft may be in a better position to make this acquisition than was immediately obvious. It has a broader means of distribution, which could favor an increased scope of its internal projects. To put it another way: Smaller and medium-sized studios were ideal acquisition targets for Microsoft over the past couple of years as it focused on concluding the Xbox One era, but with Microsoft’s recent and dramatic expansion of storefronts and services, it may have the tools to financially support and distribute Bethesda games at its current scale.
Will Bethesda games still appear on PS5?
As I said, Microsoft will need to find a way to justify the humongous budgets of Bethesda’s biggest titles. That may mean that those games appear on the PlayStation 5. But if Microsoft finds huge success with xCloud and Game Pass on PC, I wouldn’t hold my breath on PS5 releases being a priority. (As for Nintendo, let’s wait and see if the company releases a new Switch powerful enough to run next-gen games before we even worry about Microsoft greenlighting ports.)
Until then, Bethesda still has timed-exclusivity deals with Sony for the upcoming games Deathloop and GhostWire: Tokyo. And look, I’m really excited about both of those games, but I don’t think Microsoft will care about its own exclusivity until the game name begins with “Elder Scrolls” or “Fallout.”
The last game by the Deathloop studio, Arkane, sold 2.5 million copies by 2018. For comparison, The Elder Scrolls 5: Skyrim has sold over 30 million copies.
Are exclusives bad for video games?
I believe the more available a game is, the better. Competition breeds creativity. Plus, exclusives feed the already toxic culture of “console wars.”
In this particular case, I do wonder if Microsoft has provided Bethesda a lifeline. Look back at the performance of the publisher’s video game releases over the past five years. Consider that it may be years more before Bethesda releases its next big hit. Then remember we’re in the middle of a pandemic, and this may just be the beginning of the financial crisis.
During times of global economic trauma, industries consolidate. The video game business isn’t any different from every other industry grappling with this reality.
One last thing: Consider who else could have made this acquisition. Google, Amazon, and Apple are actively angling for better positions in the games industry. There was one traditional video game company with enough money and infrastructure to make this acquisition: Microsoft.