Buying Out Valve Would Serve Microsoft Better Than EA

There are a few reasons why the rumors of Microsoft buying a major company has any standing ground. The first is the obvious gamer perspective; Microsoft has no major games. Ever since the latest generation of consoles started, Microsoft has been rather lackluster with first-party games and Sony has been absolutely dominating them in terms of releasing quality titles year in and year out. This coming year Sony nearly triples the amount of exclusives Microsoft has scheduled and timed content from major third parties also swings in Sony’s favor. Microsoft has no real answer to this as of yet beyond a few interesting looking titles, but nothing that seems to be blockbuster capable. 

Most of Microsoft’s studio purchases have also dwindled to stale franchises, or closed all together. Rare has done almost nothing for years, but is finally getting a chance with the upcoming Sea of Thieves. Other studios like 343 are stuck with tired old franchises that could use a break. Microsoft needs new ideas and more development teams to compete with the many teams Sony has churning out titles.

We can’t just look at it from a gamers perspective. Microsoft is so much more than gaming and their company focus is elsewhere right now, and there is one key thing that is happening to American companies: tax cuts. With new rules put in place, companies are getting tax breaks to bring in money and offer new jobs or acquire new assets. A lot of companies have been using the money to make purchases, or invest in their own company with new adventures. Through it all, though, Microsoft has been rather quiet. With all this money opening up, Microsoft has over 139 million in cash reserves which are directly related to the tax breaks , but is currently worth over 650 billion dollars with numbers set to increase into the Trillion dollar range rather soon. With companies like EA being worth about 38 Billion, it becomes a question of what Microsoft plans to do considering they could easily purchase a company such as EA without much drawback, especially considering a majority of the sale will remain as stock equity.

This is why we look at Microsoft as a whole. Xbox isn’t their main priority like PlayStation is to Sony. For Sony, PlayStation is everything. Their TV sales dwindled, their movie business isn’t growing and other areas were either sold off or are at a stand-still. Microsoft on the other hand is all about PC, their new Surface line, their software, and now their “in-home” experiences. This shined through when Xbox One was first announced and Microsoft relied heavily on the additional features outside of gaming.

 

Microsoft is in competition with companies like Apple and Samsung more than they are with Sony in gaming. Microsoft is trying to find ways to innovate, to lead the future of technology, and remain relevant in this ever-evolving world. Self-driving cars, in-home equipment, “smart” homes, the tech industry is expanding in so many ways, and they want it all connected through Windows.

This makes Valve the better purchase. Valve no longer is just a developer. They have several key franchises under their belt like Half Life and Portal, so they could obviously pump enough exclusives to make Microsoft competitive in that environment. What’s more important, however, is how Valve has evolved thanks to Steam; a PC client that now has streaming, and TV compatibility to boot. A client that is trusted by gamers, has millions of active users, and the ability to evolve “into the living room” very easily. So much so that Valve has been rather adamant about it for many years now. Valve’s services are just as important as their games, and Microsoft would be winning with both. A PC-to-Xbox experience would expand basically overnight, and their cross-buy features would be absolutely unstoppable since Sony would have nothing to compete with it. Even the likes of EA has yet to become this massive in a cross platform world.

Talking financially, Valve wins here too. Currently Valve is still a privately owned company with no stock, and it is growing extremely fast. They make headlines in the financial world by being a company worth over a billion dollars while operating on a small scale. Their estimates are around 1 to 5 Billion dollars, which is nothing compared to EA, and their operating income is extremely positive with very little risks to take over. Obviously once companies get big enough, they either sell themselves or enter the stock world.

It’s also worth noting that Valve is good at making hardware, they were part of development teams that worked on VR. They have VR titles coming. They could even make AR titles for the Hololens that Microsoft is slowly releasing. Sony has studios dedicated to user experiences which is why they get things like PSVR or motion controls, meanwhile the Xbox has nothing similar where teams are dedicated to new experiences. When games “go digital” there has to be a reason to keep buying hardware, to keep using Microsoft or Sony products to get digital games, and these ideas are what will help. Microsoft could benefit greatly with devices that bridge their Surface line with video games, and continue with AR.

Valve and Microsoft have always had a close relationship, but the bonding of the two is what could potentially bridge PC and consoles. Indie titles, and a store that PC gamers love would be bridged to Xbox. Xbox’s community would move swiftly between PC, Xbox, and other products. It’s two solid foundations that become a bright future. The question though, is it big enough? And will Microsoft leave Valve alone, or will they stifle them like the other studios they purchased?

Then we have another route that Microsoft can go and that’s with EA. With EA you pump dozens of development teams directly into Microsoft. They could, and probably will, start making Xbox exclusives, but most of EA’s money comes from being a third party and being able to swing at whatever is selling. So this route would be more like a partnership where EA is basically left standing on it’s own, but also favoring Microsoft heavily for obvious reasons. Would games like Madden or Fifa go exclusive? Probably not. It’d be like Minecraft, owned by Microsoft, but overall not touched.

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That being said, future titles and new IP’s most likely would be exclusive. Content would be exclusive, and the user experience would be geared toward Microsoft. They would be smart to take some of the teams EA owns and start pushing out exclusive content. EA would also need to expand on their services including Origin on PC, and their EA Play subscription. EA and Microsoft obviously have a close relationship as of now, and these deals are what are keeping Xbox alive. If EA is in talks to bridge these services to PlayStation, this could be what triggers Microsoft into talks to spend more money, or eventually buy EA to keep services exclusive. This is why the talks probably came up to begin with because Microsoft is looking for ways to expand the services, and EA already has the base for networking gamers together.

However, EA becomes a trickier slope due to the massive company being a big part of the industry. You can’t simply buy EA and make it exclusive because the entire industry would take a massive blow. If all of EA games went exclusive that would be more damaging as a whole than it would be benefiting one company. So how would Microsoft decide what is, and what isn’t, exclusive? What would happen to licenses such as NHL, Madden, or even Star Wars? How would Microsoft manage EA as a whole? Would they be willing to take on this massive company to simply bridge the services? Unlike Valve, EA’s finances are not straight forward and have been on a tricky slope for a few generations now. The whole idea of EA being purchased by anyone came up a few years ago due to EA stocks slumping.

So the answer is probably no, and they more than likely will not buy EA simply to pump exclusives into their line-up. With how much money this would take they could easily buy rights to some other games and advertise them. Buying EA would lead to an industry shaking announcement, and it has too many consequences, and it’s not clear if it would improve Xbox sales or not. EA would simply need to offer more than games for Microsoft to see the value, and currently their services are not up to that standard.

Overall Valve seems like the safer bet, and could be just as industry shaking, but has less of a consequence to it. Microsoft’s route seems clear, and Valve is clearly already on that route. With quality games, and quality services, Valve is what Microsoft wants. EA is heading in that direction, but might be too big to gamble on.