I don’t think Microsoft would buy a game publisher at the size discussed. To buy EA, if its current capitalization is $36B, they would have to give at least a 20% premium, (more realistically 35%+, because this is a hot area, not some sleepy business), so at least $43B and up. To buy gaming companies, what makes more sense for them is buying high potential situations like Minecraft, where they can buy for $2,5B, and turn the value into maybe $10B+ by plugging into their vast network. EA is too big for that, in EA’s case they would actually have some diseconomies since EA already works with everybody, and if some of those don’t want to work with Microsoft, then value is lost (same thing if Microsoft would use EA games that would have released everywhere as Xbox exclusives instead).

I think Microsoft is trying to become the infrastructure and platform player here, not necessarily a bigger game publisher. They will do more of that to the extent its necessary to further the other objective, and they see great risk/reward opportunities at very manageable scale, but going too big in that part of the value chain defeats their real aim, sucks their management talent and attention. I think they are trying to add their Azure/AWS type capability which they are still developing and which nobody has done before to a business that looks like Netflix in gaming, but they are not really trying to become a bigger still studio for games. Think of it this way: they are trying to do things that haven’t been done, not trying to become a bigger thing that already exists. There is more money in the former. One of the ways I could be wrong is if their Cloud/AI technology capabilities are greater even than I think, and they already believe they can take all that EA content, add some serious new tech to it and create even greater value.