Yesterday Microsoft made a big move in the gaming industry. The software giant purchased the award-winning ZeniMax Media, the parent company of Bethesda Softworks, for $7.5 billion. Bethesda is one of the largest privately owned game developers and publishers in the world, known for The Elder Scrolls, Fallout, DOOM, Prey, Deathloop, Quake, Wolfenstein and Dishonored. The acquisition will bring an iconic games portfolio, publishing expertise and world-class talent to Microsoft to help the company grow its gaming business. Subject to typical closing conditions and regulatory approvals, Microsoft believes the acquisition will close in the second half of the company’s 2021 fiscal year.

“Gaming is the most expansive category in the entertainment industry, as people everywhere turn to gaming to connect, socialize and play with their friends,” said Satya Nadella, Microsoft CEO, in the company’s formal announcement. “Quality differentiated content is the engine behind the growth and value of Xbox Game Pass—from Minecraft to Flight Simulator. As a proven game developer and publisher, Bethesda has seen success across every category of games, and together, we will further our ambition to empower the more than three billion gamers worldwide.”

ZeniMax Media global offices, current structure and leadership are part of the deal

According to the Microsoft announcement, the acquisition includes the global publishing offices and development studios of ZeniMax Media, including more than 2,300 employees at Bethesda Softworks, Bethesda Game Studios, id Software, ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog and Roadhouse Studios. ZeniMax Media was founded in 1999 by chairman and CEO Robert A. Altman who will continue to manage the company.

“This is a thrilling day for this company, our employees, and our fans. We have enjoyed a close partnership with Microsoft for decades, and this deal is a natural progression of those years working together,” said Altman. “The big winners today are our fans. We are continuing to develop our slate of AAA games, but now with Microsoft’s scale and entire Game Stack, our games can only get better.”

Why Microsoft and Bethesda are a good fit

Pete Hines, senior vice president of global marketing and communications for Bethesda, commented on the acquisition and why Microsoft is a good fit in a blog post.

“So why the change? Because it allows us to make even better games going forward. Microsoft is an incredible partner and offers access to resources that will make us a better publisher and developer. We believe that means better games for you to play. Simply put – we believe that change is an important part of getting better. We believe in pushing ourselves to be better. To innovate. To grow,” Hines said.

Hines said the two companies have worked together for years, and they share basic values including passion for their work, quality, collaboration and innovation.

“Yes, it’s a big change for us, but after taking a minute to absorb the magnitude of this acquisition, we’re going to continue doing what we know and love: making great games. We’re going to keep trying new things. We’re going to take the same passion we’ve poured into what we do, and the passion that our community brings to the things we make, and do even better,” added Hines.

Xbox Game Pass now at 15M subscribers

The Verge speculates that Microsoft’s strategy isn’t to acquire the company for exclusivity of games, but to make Xbox Game Pass even more valuable. Microsoft addresses this in its announcement. Microsoft’s Xbox Game Pass gaming subscription has recently exceeded 15 million subscribers. The company plans to add Bethesda’s current titles to Xbox as well as its future games to Xbox Game Pass.

 “This is an awesome time to be an Xbox fan. In the last 10 days alone, we’ve released details on our two new consoles which go on pre-order tomorrow, launched cloud gaming in Xbox Game Pass Ultimate, and now we’re making another investment in the most critical part of our strategy: the games,” said Phil Spencer, executive vice president, Gaming at Microsoft. “Generations of gamers have been captivated by the renowned franchises in the Bethesda portfolio and will continue to be so for years to come as part of Xbox.”

Insider Take

As we noted last week when we shared Microsoft’s partnership with EA Play, Xbox Game Pass subscriptions range in price from $4.99 a month to $14.99 a month. At more than 15 million subscribers, this deal will pay for itself in no time. Let’s assume, for example, that all 15 million pay $4.99 a month. That’s $898.2 million per year, and we know that some subscribers subscribe to the console version and others pay even more through the Ultimate subscription. Microsoft is making a pricy investment, yes, but it appears to be a wise one.