Microsoft buys Bethesda, maker of hit Fallout and The Elder Scrolls games, in $7.5 billion deal

Microsoft announced Monday that it will buy ZeniMax Media, the company that owns well-known video game publisher Bethesda, for $7.5 billion in cash.

It’s the biggest gaming acquisition in Microsoft’s history. The company bought Mojang, the studio behind popular title Minecraft, for $2.5 billion in late 2014. That proved to be a boon to the firm as Minecraft continued to surge in popularity, rapidly becoming the world’s best-selling game with over 200 million copies sold to date.

The acquisition of Bethesda gives Microsoft access to a raft of successful game franchises, including the role-playing game series Fallout and The Elder Scrolls and the Doom shooter franchise.

“Gaming is the most expansive category in the entertainment industry, as people everywhere turn to gaming to connect, socialize and play with their friends,” Microsoft CEO Satya Nadella said.

“With the addition of Bethesda, Microsoft will grow from 15 to 23 creative studio teams and will be adding Bethesda’s iconic franchises to Xbox Game Pass,” Microsoft said. “This includes Microsoft’s intent to bring Bethesda’s future games into Xbox Game Pass the same day they launch on Xbox or PC.”

Microsoft’s Xbox unit is betting heavily on subscriptions this year. Its Xbox Game Pass platform gives players access to dozens of games and the firm recently included a so-called cloud gaming feature that lets users play games on their phone or tablet. Microsoft said it aims to bring Bethesda’s upcoming space-themed game Starfield to Xbox Game Pass on the day of launch.

Microsoft is also selling its new Xbox Series X and Xbox Series S consoles — which will go head-to-head with Sony’s PlayStation 5 next month — via point-of-sale financing plans to spread the cost over monthly installments. Preorders for both systems start on Tuesday.

Speaking on CNBC’s “Squawk Alley” Monday, Microsoft’s Xbox head Phil Spencer said ZeniMax would continue to operate independently following the acquisition and suggested there would be no cuts at the company.

“Our plan is to leave it alone,” Spencer said. “ZeniMax has an amazing track record of building great games. Our goal is to make ZeniMax the best ZeniMax they can be.”

The deal comes at a time when interest in video games has surged thanks to the coronavirus pandemic. Demand for gaming exploded as countries went into lockdown earlier this year, and companies in the sector have reported rising profits and revenues as a result. The industry is forecast to generate revenues of $159.3 billion this year, according to games analytics firm Newzoo.

“This announcement comes at a critical time,” George Jijiashvili, a senior analyst at Omdia, told CNBC. “The lead-up to the launch of the next-gen consoles is when gamers pick their ‘religion.'”

Jijiashvili said Microsoft could launch Bethesda games as exclusive Xbox titles, meaning they wouldn’t be available on other platforms such as the PS4, PS5 and Nintendo Switch. Microsoft recently said it would delay the launch of Halo Infinite, one of the flagship games for its new consoles, until sometime in 2021.

“The delay to Halo Infinite, the most anticipated Xbox exclusive, is a huge blow to Microsoft, but it is betting that Game Pass will sway gamers in the long run, thanks to day-one launches, cloud gaming and a growing library of appealing games,” Jijiashvili said. “The question of exclusivity now looms large. Microsoft has not opted for the exclusive route with its past acquisitions, but this may change given the scale of this this acquisition.”