Microsoft Considered Acquiring Zynga but Decided to Pursue a Bigger Opportunity

Microsoft is seeking regulatory approval for its $68.7 billion acquisition of Activision Blizzard. However, the company is now revealing its previous attempts to expand in the video game industry.

Microsoft Gaming CEO Phil Spencer testified in San Francisco on Friday that the company had engaged in discussions with mobile game developer Zynga, although the deal never materialized.

The ongoing hearing, which began on Thursday and will continue next week, follows the Federal Trade Commission’s temporary restraining order to halt Microsoft’s acquisition of Activision Blizzard. The court has agreed to maintain the status quo while reviewing the FTC’s request for a preliminary injunction.

According to Spencer, Microsoft sought a bigger opportunity than what Zynga offered in the mobile gaming business. In the end, Take Two Interactive acquired Zynga for $12.7 billion in May of last year.

Prior to Microsoft’s offer, Activision met with a financial firm to outbid Take-Two’s purchase of Zynga.

Spencer did not disclose the specific timeframe of Microsoft’s talks with Zynga, and the company declined to comment further. However, Zynga revealed in a filing last year that it had met with representatives from an unnamed “strategic acquirer” expressing interest in an acquisition.

This is not the first time Microsoft has shown interest in Zynga. The company reportedly attempted to acquire Zynga in 2010.

As Microsoft aims to finalize the Activision deal, it acknowledges that the joint entity would be smaller than Sony and China’s Tencent, both major players in the gaming industry. Spencer highlighted the growth potential of mobile games compared to PC and console gaming, which account for the majority of Microsoft’s gaming revenue. However, there are challenges with mobile gaming such as smaller screens and the absence of controllers on smartphones. Additionally, Apple has hindered Microsoft’s efforts to bring its Game Pass library to the App Store.

Spencer revealed that after reaching out to Zynga, he collaborated with Microsoft finance chief Amy Hood to explore mobile opportunities. Activision, already a Microsoft partner, significantly expanded its mobile game portfolio through the acquisition of King, publisher of Candy Crush Saga. Mobile games accounted for 35% of Activision’s $8 billion revenue in 2022.