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well the closing of the Activision
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Microsoft deal is a big step forward for
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the two companies themselves the next
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question is how the two sides come
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together and the impact that they may
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provide on the video game industry
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pleasure to be joined by harier Singh
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who's a management Professor here at the
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Wharton School he is also co-director of
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the Mac Institute for Innovation
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management harb great to talk to you
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again yes thanks for inviting me thank
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you all right so obviously this is a
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deal that's been talked about for a
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while it's now starting to move forward
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what was your reaction to the deal
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itself and the potential impact of these
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two
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companies well it was actually quite a
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remarkable deal it was the largest deal
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that Microsoft had made and at 68.7
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billion it was a very very large step uh
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it was also truly
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transformative and you could see that in
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the impact on Sony when the stock price
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of Sony on that particular period went
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down by 1% so it was a significant
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impact on the what people saw as the the
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PlayStation oriented gaming business um
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but also it was a way for Microsoft to
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really get time to Market this was
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something that uh they had kind of been
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envisioning and they had several
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offerings based on the Xbox and
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applications on the Xbox but um
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activation brizard gave them uh you know
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large numbers of users with Candy Crush
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and Call of Duty and other such uh uh
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games and also multiple platforms
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including the mobile the cloud um and
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and many others uh so I think this is
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truly a transformative deal and the
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other point that's worth making is that
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uh tech companies have been growing
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through acquisition at a remarkable Pace
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um and so in the just a few years ago
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they were relatively skittish about
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making Acquisitions because worrying
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about loss of talent which is is a real
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issue and also about organizational
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culture differences and so on but they
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have gone into this with both feet so
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then is the expectation that maybe we
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will continue to see even more types of
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Acquisitions in this Tech space as we
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move forward because especially if if
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these two companies are able to come
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together uh re relatively
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seamlessly I think that's exactly right
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the question is what is the competitive
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reaction from other players and uh they
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will also uh need to sort of access this
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Market which is moving very very fast uh
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it's a source of Revenue but there's
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also platform sharing people are working
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across platforms users are working
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across
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platforms um and I think the key issue
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which is tied to my uh interest in
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technology and Innovation is uh that
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firms are recognizing that uh internal
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development is a bit slow and therefore
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even though you might have fewer
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cultural differences sometimes you don't
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win with your internal products
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uh Partnerships are useful alliances are
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useful but then there's a question of
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you know the end game and when it comes
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to in the end game as in how do we share
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the returns over time and is there an
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opportunity where in fact uh one player
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needs to take charge and I think that's
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the issue with this gaming industry that
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uh there's you cannot have Microsoft and
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Activision being offered as a as a pair
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over the long run so you really have to
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sort of decide whether you want to
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access control but then you have to
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manage the
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relationship why then does a company
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like Microsoft go ahead and make an
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acquisition like this of
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Activision when they certainly have the
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resources to probably build out a lot of
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their own aspects of what they're going
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to be getting from Activision right um
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well you can think about you know uh
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Google buying YouTube right even though
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they had tremendous resources to do so
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and it was because YouTube was a
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platform that actually was you know had
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users and was was already integrated
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fully as a platform uh they also
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invested in Android which became a huge
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ecosystem uh so these companies have
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recognized unlike previous years where
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you had previous decades really where
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you had companies getting disrupted by
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the startups they're still getting
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disrupted but what they're seeing is
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maybe I should buy the startup or
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partner with the startup that's actually
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winning in their space now you're going
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to make some mistakes but then um those
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mistakes are small in relation to the
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payoff if you get some of these right
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Sati Nadella after this deal was
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announced mentioned that he felt that
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this allowed Microsoft to make a real
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contribution to Consumer markets and I
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found that interesting because I think
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of Microsoft and all the different
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products that they bring to Market as
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one that has already connected with the
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consumer I guess he didn't feel that way
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and that activ Vision really gave him
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that path to be able to do
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so yes uh and it's fascinating you
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mention that because uh you know Steve
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bomber who preceded Satya did a
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phenomenal job in many many ways but his
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idea was to focus really on the office
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platform right and uh those kinds of
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applications and so they did well with
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that and they never really had enough of
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a strength in the entertainment area and
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I think Apple kind of showed that you
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can be seamless across on the on the
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mobile device
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um and Xbox you know in a sense was
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always a little uh you know it was a
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hardware based second platform right
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whereas Apple had this digital Hub
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across all platforms so and in fact
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Satya was um when he came in he had to
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resar to the mobile business now that
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meant that there were developers already
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there but to sort of give them the
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visibility and the resources and this is
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sort of a step where you're getting to
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the entertainment desktop but it's no
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longer a desktop it's the mobile PL
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platform it's the cloud it's streaming
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it's all those
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possibilities how much does Microsoft
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need to put its own fingerprint on
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Activision as it moves forward or is it
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easier just to I mean obviously
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Activision has been a very successful
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company do you leave it run primarily
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the way it has run maybe with just some
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minor touches here and there I think
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that's an excellent question and that's
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the core issue um what Microsoft did
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with LinkedIn perhaps is uh the way they
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need to manage Activision uh which is
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they left LinkedIn largely alone and
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this was the fear when they bought
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LinkedIn that they might actually lose
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the community because you know Microsoft
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still has this complex image right of
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being kind of a you know more a business
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application kind of firm and now you're
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in a territory of individual users of
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all ages in the case of Activision so um
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they have a template with their
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acquisition of
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LinkedIn which they would be you know
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it'll be advised to pursue that uh in
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other words autonomy to the unit giving
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it the complimentary resources it needs
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um and also sort of ensuring that the
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that the culture of Activision uh
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remains um what brought it to this point
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you know you might actually manage the
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you might may disrupt the culture
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through this acquisition that was going
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to be my next question because you
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obviously want this to be as successful
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a deal as possible and for Microsoft
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they probably have to be aware of not
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trying to overdo it as as they kind of
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bring all these elements on board
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absolutely and you know there's a real
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danger of this is where Tech firms have
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had a long history of failures where uh
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they send in you know armies of people
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who have good intentions but they're
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saying you have to adopt this system you
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have to up this way of doing things this
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is our process for making decisions um
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and you know immediately you're imposing
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bureaucracy on the other side um and I
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think that is a real danger that they
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have um they seem to have done well with
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many of the more recent acquisitions so
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but this is something that they have to
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continue to follow and the reason why
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I'm bringing this up is that culture
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really is about shared Norms values and
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beliefs and those are already all set in
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activism it's a big big organ $69
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billion in value yeah it's it's got
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revenue it's got you know developers
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it's got It's got lots of Assets in
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place and the first question they would
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have is is this a penalty for Success
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you know we did well and now we being
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bought by this
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company luckily Microsoft's image is
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positive and and can actually be helpful
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but that's not enough you know you need
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to ensure that the Innovation engine
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remains intact so then look at this from
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the other side from Activision side and
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and where do they see the the the best
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paths to success and adding on to the
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success they've already had as they move
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forward so on that front this is a great
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transaction uh because uh they can get
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the scale of Microsoft uh they can get
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the complimentary
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resources um they have long-term
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durability in their strategy uh and I
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think a way to manage this and there are
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some templates actually going quite a
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quite far back IBM bought Lotus for
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networking software and actually the way
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it was managed was Lotus was accessing
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the resource so they were asking them to
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use the parent as a uh as a as a menu of
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possible resources and you kind of
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cherry pick what you want so that would
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be an ideal kind of situation if
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Activision kind of uh drives the uh the
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the the choice of complimentary
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resources for Microsoft uh capital of
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course is easy but the rest of it uh you
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know how to how to seamlessly connect to
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the platforms Microsoft also has the
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cloud for example those are important
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issues to think about how do you think
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then the the uh the remainder of the
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tech sector looks at this at this
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acquisition as it's gone through and
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obviously the other side to it is also
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the process that it went through uh with
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all the regulatory hurdles that it had
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to clear both here in the US and and
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abroad as well how does the industry as
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a whole look at this deal this is a
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transformative deal it is changing uh
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you know you can almost think about the
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ecosystems you know of users and the now
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Microsoft has a position as um into a
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major player and actually providing
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their ecosystem in addition to that of
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Activision so um players in the industry
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uh now need to recognize that there are
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Deep Pockets that is uh there is a
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long-term perspective um and so um how
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do how do the sort of the relationships
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among different players with long-term
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connections between them how do those
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relationships change within their own
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ecosystem so that's the first point the
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second point is speaking to the
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antitrust issue which is I think a a
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really really important issue uh it was
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a real surprise to many that because the
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antitrust authorities had actually
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mentioned that they're going to take a
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very hard look at there lots of scrutiny
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uh but the European side actually um you
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know the British Authority in particular
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the competition markets Authority um
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sort of indicated that they were willing
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to go along with this and I think that
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was the the signal that uh other players
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kind of saw as indicative of uh how this
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will go forward because the very thing
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that we say is a good deal for Microsoft
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can be seen as anti-competitive from an
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anti point of view you mentioned the
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word ecosystem a moment ago you
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mentioned a couple of times in the
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interview and I guess from Microsoft's
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perspective there's an element of of
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what Sati nadela and the company wanted
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to kind of reach looking at as you said
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what Apple has kind of set up yes and I
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guess to degree Amazon is is kind of in
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that same boat as well they have both
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built
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ecosystems that allow people to come in
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maybe at One Touch point but also be
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able to benefit from so many other touch
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points and and I guess that's what
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Microsoft's looking to try and build as
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well yes I think the complimentary
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resources the complimentary activities
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uh and users have kind of you know there
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was a the thought kind of just a few
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years ago that an ecosystem has to be
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open but the Apple evil ecosystem is
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kind of partially open it's also very
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proprietary the iOS and people have been
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willing to live with that for now this
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is always a question um I think
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Microsoft has had traditionally a more
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you know open ecosystem uh and the
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seamlessness of you know these kinds of
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applications like games and the other
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activities that you can get from other
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parts of the ecosystem that Microsoft
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has uh is potentially a real a real
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asset and by the way it's all about time
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to Market and the other concept for you
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that's interesting in this discussion is
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market value versus replacement value
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okay so $69 billion what it would take
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to actually replace activism through
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Microsoft's own activities whether it's
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internal or through Partnerships and
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without doing proper calculations there
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aren't you know these are not tradable
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assets you have to buy them you can't
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sort of if they don't want to partner
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with you there's no other
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choice yeah yeah you're talking about
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the investment that it would take for
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for Microsoft to build out each of the
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components that they would need to get
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to where Activision is right now and
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they have tried of course they've had
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the xbo ecosystem and so on and you know
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the the user base is not as strong I
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mean this happens you know you you
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realize you're not winning a particular
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race
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um but you have complimentary asset
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there's value on both sides here it's
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not as they're just buying into it and
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and holding let me finish up by asking
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you one of the questions that's
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obviously been out there a lot around Ai
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and and thinking about this deal and
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thinking about tech in general how AI
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will be impacting these companies and
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these types of deals moving forward
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right I think that's a also a very very
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important question we are so early in
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the evolution of AI you know it's almost
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like the early stages of uh you know
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microprocessor chips and look how far
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they came and this is not even Hardware
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based so the possibilities are still
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emerging uh but there's no doubt that
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there will be an impact uh in many many
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ways including how users uh end up using
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AI U but also how developers use AI so I
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think that from the development side you
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might see uh dramatic changes uh within
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um The Gaming Arena you know and and
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also in applications harbe always great
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to get your Insight thank you very much
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thank you so much thank you harbe sing
00:15:06
man management Professor here at the
00:15:07
Wharton School also co-director of the
00:15:09
Mac Institute for Innovation
00:15:15
management
