The centrality of the Game Pass subscription service in Microsoft's overall gaming strategy cannot be overstated. CEO Satya Nadella himself described it as the company's bid for a Netflix equivalent in the gaming industry and every single acquisition since made by Microsoft has reinforced the Game Pass library to attract more customers.
Speaking a few days ago on Yahoo Finance Live, Wedbush Securities analyst Michael Pachter admitted to having been wrong to doubt the original idea of Game Pass. He then said the game subscription service could jump to a hundred million subscribers once the Activision Blizzard deal is completed.
Microsoft had a vision years ago that I thought was stupid, that they were going to come up with a subscription service, and everybody would pay them for the right to play games. And they just didn't have very many games.
Then they went on a buying spree, and they bought six independent studios, the biggest of which is Obsidian. They're very, very good. But then they bought Bethesda, which is a giant studio, and now they're buying Activision. When they're done, they are the fourth major game publisher in the US. So they're going to be giant, and they're going to be in a position to actually support their Game Pass subscription.
Their future vision is, let's eliminate the console. Let's use the cloud, and let's deliver games to any screen that you have. And that potential market is 3 and 1/2 billion people. So I don't think they'll get that many Game Pass subscribers, but will they go from 25 million to 100 million? Yes.
I can confidently state that the FTC has no legal basis to challenge this. They might try. But the basis for a challenge here would be that if Microsoft were to complete its acquisition of Activision, that they would pull games off of Sony's Playstation platform. And Microsoft has already blogged and tweeted we won't do that. We have contracts. We'll honor them.
[...]watch October because that's nine months after the deal. That's kind of when the FTC has to fish or cut bait. And if they don't sue by the end of October, watch Microsoft announce that they're going to close the deal by year end. And then we'll see what the FTC does. But I think this deal closes. I think it closes no later than January 15. And I think the price is 95 bucks, hence my price target.
It shouldn't be long now until we hear from regulators like the FTC and UK's CMA. If the deal goes through, we'll see whether Game Pass does get a massive boost as predicted by Michael Pachter.