SAN FRANCISCO, CALIFORNIA – JUNE 23: XBOX CEO Phil Spencer arrives in federal court on June 23, 2023 in San Francisco, California. Top Microsoft and Activision/Blizzard executives will testify in a five-day hearing against the FTC to determine the fate of the $68.7 billion merger between the two companies. (Photo by Justin Sullivan/Getty Images)
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Microsoft Gaming CEO Phil Spencer testified in San Francisco on Friday that the company had previously opened talks with mobile game developer Zynga but ultimately failed to reach an agreement.
The hearing, which begins Thursday and will continue next week, comes after the Federal Trade Commission received a temporary injunction to prevent Microsoft from closing its purchase of Activision. The court agreed to uphold the status quo when considering the FTC’s request for a preliminary injunction against the deal.
“Great respect for everyone at Zynga and what they’ve built,” Spencer said at the hearing. “Ultimately, to stand a chance, we thought we needed to have something even bigger than Zynga, given our very small starting space in the mobile games business.”
Take two interactions, the publisher of Grand Theft Auto and other games, finally acquired Zynga last May for $12.7 billion. Zynga was originally for Facebook’s popular social game FarmVille, before expanding into mobile games, largely through acquisitions.
Spencer did not say when Microsoft is negotiating with Zynga and the company would not be reached for comment further. However, Zynga said in a submit in September 2021, executives met with representatives of an unnamed “strategic acquirer” that “expressed a non-specific interest in acquiring Zynga.”
This is not the first time Microsoft has shown such interest. Company report tried to buy Zynga in 2010.
In trying to reach an agreement with Activision on the finish line, Microsoft said that even if the two companies come together, the joint entity will be smaller. sonyhas a PlayStation console that competes with Microsoft’s Xbox, as well as China’s Tencent.
Spencer said on Friday that mobile games have a better chance of growing faster than PC and console games, where Microsoft derives most of its revenue from games. Microsoft has been trying to ramp up cloud-based game streaming on mobile devices, but that effort is fraught with challenges. These include smaller typography on phone screens and the fact that smartphones don’t come with a controller, Spencer said.
Besides, Apple blocked Microsoft’s Game Pass library of video games on its App Store, he said.
Spencer said that after the company went to Zynga, he worked with Microsoft’s chief financial officer Amy Hood to explore mobile opportunities. Activision is the largest mobile content publisher and has been a longtime Microsoft partner, he said.
Activision has grown its mobile game portfolio with the acquisition of King, publisher of Candy Crush Saga in 2016. About 35% of the company’s $8 billion revenue in 2022 comes from its King segment.