Microsoft said on Monday it would acquire ZeniMax Media for US$7.5 billion in cash, strengthening its Xbox video game offering with the studio behind titles such as Fallout and the Doom, as competition heats up with Sony.
ZeniMax is the parent company of Bethesda Softworks, which has also developed hits including The Elder Scrolls, Wolfenstein, and Dishonored.
The deal comes more than a week after Microsoft's failed bid for short video app TikTok's U.S assets. TikTok has currently structured the deal as a partnership with Oracle and Walmart rather than an outright sale.
Microsoft said it plans to bring Bethesda's future games into its monthly Xbox Game Pass subscription service when they launch on Xbox or PC. The game pass now has more than 15 million subscribers, Microsoft added.
Bethesda's structure and leadership will remain in place, Microsoft said.
Gaming is on a tear due to demand from stuck-at-home users during the COVID-19 pandemic and Microsoft has put its faith in offering users many ways to play via its cloud service and consoles at different price points.
The latest deal would mean Microsoft will have more hit titles in its gaming library, a key attraction point for gamers while choosing a console.
"Microsoft recognizes its need for consumer based revenue growth which we believe this deal will directly help drive along," brokerage Wedbush Securities said in a note.
Both Microsoft and Sony are launching their next-generation gaming devices in November, with pre-orders for Xbox going live on Tuesday.
Microsoft said the ZeniMax deal will close in the second half of fiscal year 2021, and have minimal impact on adjusted operating income in fiscal years 2021 and 2022.
(Reporting by Munsif Vengattil in Bengaluru, Additional reporting by Uday Sampath Kumar and Ayanti Bera; Editing by Anil D'Silva, Patrick Graham and Shinjini Ganguli)