Friday, September 22, 2023

Microsoft could buy Nintendo before Bethesda or Activision: why it didn’t do it

Buying Nintendo was the great goal that Phil Spencer pursued, the Xbox leader, before the acquisitions of ZeniMax Media (Bethesda) and Activision Blizzard. This was revealed after the publication of confidential documents linked to the recent lawsuit between Microsoft and the United States Federal Trade Commission (FTC).

Among the files in question, which also allowed us to know what the next Xbox console will be like and when it will be released, an email appeared between Spencer and other executives of the Redmond firm discussing the possibility. The exchange took place at the beginning of August 2020, just over a month before the company announced the agreement to take possession of the firm responsible for Doom, fallout and starfield.

The scenario of a possible purchase of Nintendo by Microsoft is interesting. In the e-mail in question, Phil Spencer responds to a concern in this regard raised by Takeshi Numoto, commercial head of the American company. A piece of information that provides context, and that is important to remember, is that at that time those led by Satya Nadella were in the midst of a bid to try to buy TikTok, something that ultimately did not materialize.

“Takeshi, I completely agree that Nintendo is THE biggest asset for us in the gaming space and today gaming is our most likely path to consumer relevance. I’ve had numerous conversations with the leadership team at “Nintendo about closer collaboration and I feel that if any American company had a chance with Nintendo, we would probably be in the best position,” said the Xbox leader.

Microsoft and its interest in buying Nintendo


Why didn’t Microsoft move forward with a formal takeover attempt for Nintendo, then? The answer is simple and is given by Phil Spencer himself in the same email. According to the executive, the Japanese were “sitting on a big mountain of money”. Thus, he argued that Nintendo’s board of directors was not interested in pushing for a larger market share or driving up its stock price.

The Xbox leader stated that he did not see a possible purchase of Nintendo in the immediate future, but did not rule out continuing with the game in the long term. In fact, Phil Spencer mentioned that ValueAct, an investment firm with a stake in Microsoft, was buying shares of the Japanese company and that this could open the door to a more direct relationship between both companies.

In any case, the executive made it clear that, if Microsoft ever managed to acquire Nintendo, it would be both a personal and corporate milestone. “It’s taking Nintendo a long time to realize that its future exists outside of its own hardware. Too long…”he indicated.

Without a doubt, Phil Spencer’s words can generate a lot of noise in the field of video games. And they give rise to wondering if Microsoft would really be in a position – both in 2020 and now – to go out and buy Nintendo. Believe it or not, the answer is yes.

Nintendo closed 2020 with a market valuation just above the 76 billion dollars. This not only represented a very significant growth compared to 2019, which had been $48.11 billion, but also its most notable financial moment in a decade. Let us keep in mind that the 2010-2020 period was one of significant ups and downs for the company. In fact, its weakest point was in 2014, when it was worth “just” $12.49 billion.

Today, Nintendo is valued at $50.97 billion.. A figure considerably lower than the $68.7 billion that Microsoft put on the table at the beginning of 2022 to acquire Activision Blizzard. Of course, not everything is governed by the weight of a bank account. Beyond money, convincing Nintendo to be acquired would surely have been very difficult; both for brand prestige, as well as for tradition or legacy. That is why Spencer indicated in the e-mail that he did not see the acquisition through “hostile action” as feasible.

And Valve?

Phil Spencer, head of Xbox
Phil Spencer, head of Xbox.

Another notable detail that the document reveals is that, in addition to Nintendo, Microsoft analyzed the feasibility of buying Valve. Phil Spencer mentioned in passing that he had presented the prospects for both options to the Microsoft board of directors and that the response received had been positive, provided the opportunity arose.

But not only that. The message also detailed that Redmond was still debating whether they should acquire ZeniMax Media (Bethesda) or Warner Brothers Interactive. The Xbox leader indicated that since Microsoft was trying to buy TikTok, he approached Satya Nadella with the possibility of stopping both negotiations. However, the company’s CEO gave him the go-ahead to continue.

Spencer then commented that there were still issues to be ironed out. The problem with Warner Bros. was that Microsoft would not get any of its intellectual properties. While with Bethesda, the main challenge was to resolve the valuation expectation of its founders. Finally, the balance tilted towards the latter. And Nintendo? For now, buying the Japanese firm remains a dream for Phil Spencer and company. We will have to see if there are new signs in the future.

The publication of confidential documents without censoring sensitive data is generating sparks between Microsoft and the FTC. According to NBCNews, the Federal Trade Commission has disclaimed any responsibility. In fact, a spokesperson assured that it was those from Redmond who mistakenly uploaded the files to the website of the Federal Court of the Northern District of California.

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