Tom Cruise says Paramount’s merger with Warner Bros will be a good thing. But will it? Microsoft’s purchase of Activision may provide answers.
The deal may be on pause, but barring some last-minute shock, it’s likely that Paramount’s multi-billion dollar takeover of Warner Bros will eventually happen. If and when it does, it continues a narrative of consolidation and mergers that has been going on for so long that, for most of us, it’s part of late capitalism’s scenery.
In the 1960s, Gulf and Western bought up Paramount. Sony began a shopping spree in the 1980s, snapping up Columbia Pictures, previously owned by Coca-Cola. America Online bought Warner Bros in 2001, Comcast bought Universal in 2009, and so on and so forth. Today, every major Hollywood studio is under the ownership of some broader conglomerate that has tendrils stretching into multiple other businesses.
As Paramount prepares to spend around $111bn on acquiring Warner Bros, it could be seen as business as usual – the big fish keep devouring the smaller fish until the pond’s more-or-less empty. Certainly, the deal’s cheerleaders, among them Paramount boss David Ellison and his friend Tom Cruise, have argued that the deal’s a good thing, and will lead to the production of more movies rather than less.
But to get a better idea of what is likely to happen in the coming months or years, it’s worth looking outside the film industry, and at another multi-billion dollar deal: Microsoft’s 2023 buyout of Activision.
Roots
You probably know Activision as the company that publishes the Call Of Duty games. But the firm has its roots in the games industry’s earliest days – it was one of the first third-party studios to make games for the Atari VCS, having been founded in the late 1970s. Beginning as a tiny operation of programmers who defected from Atari itself, Activision weathered the crash that hit the North American games market in the 1980s, and flourished as a multi-platform developer and publisher.
By the 2000s, Activision was one of the games industry’s behemoths, with a string of studios developing games under its banner; such franchises as Guitar Hero and the above-mentioned Call Of Duty brought in billions in revenues. Bobby Kotick was Activision’s CEO for over 30 years, and was a controversial figure to put it mildly: while his company soared in value, he faced accusations of covering up toxic work environments and allegations of sexual assault.
There was also a report that, in 2006, Kotick had phoned up a former employee and left a voicemail message threatening to have her murdered.
Ultimately, it’s the profits that make bigger headlines, however, and when Activision acquired World Of Warcraft developer Blizzard in 2008, it saw the newly-merged company’s value surge even further, outstripping its American rival, Electronic Arts by several billion.
Then, in 2022, the tech giant Microsoft announced its plans to buy up Activision. By this point, Microsoft’s Xbox console was into its fourth generation, while the launch of Game Pass in 2017 represented an attempt to create the ‘Netflix of gaming’: a library of titles available to download for a monthly subscription. Buying Activision would bring a series of franchises worth billions under Microsoft’s banner.
That deal had a huge price tag to match: roughly $68bn, making it one of the biggest mergers of its type in entertainment history.
Buyout
Actually getting the deal closed turned out to be a long and laborious process. Sony protested that it would create unfair competition, with Call Of Duty essentially locked away from PlayStation users by any Xbox exclusivity arrangement.
In April 2023, the UK’s Competition and Markets Authority blocked the takeover; Activision, in an unusual outburst, released a statement which read, “The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”
After much back-and-forth with the CMA and similar bodies in other countries, Microsoft’s purchase of Activision finally closed that October. To get there, both companies had to make various concessions, including the sale of Microsoft’s cloud gaming rights to Ubisoft, and a binding agreement that Call Of Duty would remain available for other consoles for the next 10 years.
When the deal closed, Xbox’s then-boss Phil Spencer wrote a blog post celebrating the move in the sunniest terms he could muster.
“As one team, we’ll learn, innovate, and continue to deliver on our promise to bring the joy and community of gaming to more people,” he wrote. “We’ll do this in a culture that strives to empower everyone to do their best work, where all people are welcome, and is centered on our ongoing commitment of Gaming for Everyone. We are intentional about inclusion in everything we do at Xbox – from our team to the products we make and the stories we tell, to the way our players interact and engage as a wider gaming community.”
Then the redundancies started.
Cuts
The cuts began within a matter of weeks. In January 2024, the newly-merged Microsoft-Acti-Blizz announced that a staggering 1,900 jobs were to go across various sectors of its business – representing some eight percent of its total staff.
These job losses were a result, Phil Spencer wrote in a less sunnier memo, of “aligning on a strategy and execution plan.”
“Together we’ve set priorities, identified areas of overlap, and ensured that we’re aligned on the best opportunities for growth,” Spencer added.
This, it turned out, was merely a start of a rolling procession of cuts at the merged mega-company. In mid-2024, more jobs went and several studios were closed, including Arkane Austin, developers of the vampire shooter, Redfall. Hundreds more jobs were cut in the autumn.
The following year, in the summer of 2025, over 9,000 employees were laid off – representing four percent of the gaming division’s staff. In July 2026 came more news: Xbox announced a cut to the workforce of some 20 percent, with 1,600 jobs going immediately and a further 1,600 people losing their roles over the following months.
At the same time, multiple game studios were cut loose, including Double Fine, Arkane and Undead Labs, while high-profile projects were cancelled, including Marvel’s Blade.
So what happened? If mergers are such a good thing, why do they end up producing so much collateral damage, especially to workers and the projects they spent years of their lives developing?
Overlaps
The problem with these vast acquisition deals is that they result in a vast, ungainly katamari of assorted divisions, studios and departments. In some instances, there’ll be overlaps here and there – two formerly separate marketing teams, for example, or quality assurance, or sales, and so on and so forth. Reducing those overlaps would certainly account for a few of the job losses.
But by far the bigger problem is that, as companies grow ever more vast, they become increasingly risk averse. Where smaller studios could take risks on new ideas, big conglomerates care far more about maximising profits. Nor do they care particularly about a studio’s history, its expertise or the talent of its personnel; they’re merely concerned about the bottom line.
It’s why, just before all those job losses began in July, Xbox’s new CEO, Asha Sharma – replacing Phil Spencer – complained that, “we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.”
Note, however, that Xbox isn’t losing money overall; while it has certainly experienced a decline in revenue, its revenue in the quarter ending June 2026 was $5bn. The broader problem is that Xbox has made some baffling business decisions over the past few months or so, including hiking Game Pass subscriptions (which prompted untold numbers of users to cancel).
Microsoft is also, by its own admission, syphoning more money into the AI hyperscale buildout, which it sees as more profitable than gaming in the longterm. (Ironically, it’s the explosion of AI which is making Xbox consoles so unaffordable that sales are declining, as demand forces up the price of chips and storage.)
This brings us back to Paramount’s acquision of Warner Bros. As the Microsoft-Activision scenario demonstrates, these multi-billion dollar mergers inevitably lead to mass job losses, the cancellation of projects and an even greater pursuit of revenue over creative decision-making.
David Ellison and Tom Cruise may insist that a merged Paramount-Warner will commit to making 30 films per year, but they’re guaranteed to be things like Days Of Thunder 2 or Top Gun 3 – familiar names that will turn easy profits for their shareholders. Creative gambles like Sinners or One Battle After Another, two highlights on Warner’s 2025 slate, are arguably less likely to be given the go-ahead after the merger.
This isn’t to say that big mergers don’t result in some winners, though. It was reported that Bobby Kotick, on leaving Activision in December 2023, walked off with a compensation package worth around $375m.
