(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

 

NEW YORK  - "Katamari Damacy" is a cult video game, where players roll around a sticky ball that becomes more powerful as it becomes bigger. It also doubles up as a succinct description of what Microsoft Chief Executive Satya Nadella wants from Monday’s $7.5 billion purchase of ZeniMax Media, the owner of popular games like "Doom" and "Fallout."

If there’s one thing Alphabet, Apple, and Microsoft all can agree on, it’s that they want a bigger part of the global video-gaming market. That’s now a $150 billion business annually, according to Newzoo. They and other firms sell subscription services offering multiple games, hoping to become the Netflix of the industry.

Microsoft has 10 million Xbox Live monthly active users and 15 million subscribers to its cloud service, Game Pass, which costs between $10 and $15 a month. Buying ZeniMax means more games will immediately appear on its service, making it more attractive to new subscribers and giving existing ones fewer reasons to quit. Making new content exclusive to Game Pass might attract even more. And developers will, to some extent, want to go where the players are, because that’s where the money is as well.

Neither company is releasing any financial details beyond the purchase price, so it’s impossible to say what the return might be. But at $10 a month and assuming customers stay for four years, Microsoft would need over 15 million additional customers to recoup what it’s shelling out – in reality, of course, there will be additional outside revenue because many games probably won’t be exclusive, and there will also be continuing costs. But once a platform starts rolling and acquires progressively more mass, it may tend to keep doing so – and squash rivals. That’s essentially what Netflix has been able to able to accomplish.

The video-game market may be different to video. Owners of platforms such as Apple, for example, may have more sway over where customers get their content than, say, cable firms did over video. Tim Cook’s company and Microsoft are engaged in a spat over the terms under which Game Pass would be distributed to Apple devices. And regulators are already mulling whether big tech firms have too much power over developers. But for Microsoft with its $1.5 trillion stock-market value, a $7.5 billion acquisition is a small price to pay to gain what might be critical mass in a promising new business.

 

CONTEXT NEWS

- Microsoft said on Sept. 21 that it has agreed to buy ZeniMax Media, the parent of game publisher Bethesda Softworks, for $7.5 billion in cash. The company is the publisher of popular game franchises such as “Doom,” “Wolfenstein” and “Fallout.”

- Microsoft said it will add Bethesda’s games to Xbox Game Pass, the company’s video-game subscription service. It intends to bring any games Bethesda publishes in the future to Game Pass on the same day they launch on Xbox or PC.

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Antony Currie and Amanda Gomez) ((robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))