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Microsoft's Activision Blizzard Deal Won't Hurt Sony's PlayStation Business
Sony's (NYSE:SONY) stock recently tumbled to a three-month low after Microsoft (NASDAQ:MSFT) announced its planned takeover of Activision Blizzard (NASDAQ:ATVI) for $68.7 billion. Sony's stock dropped for two simple reasons -- investors assumed Microsoft would add Activision's games to its subscription-based Game Pass service and that it would turn Activision's future games into exclusives for Xbox consoles and Windows PCs.To get more microsoft updates, you can visit shine news official website.
That initially seems like a one-two punch for Sony's gaming and network services (G&NS) business, which generated 27% of its revenue and 28% of its operating profits in the first half of fiscal 2021. But if we take a closer look at this massive deal, we'll see that those fears are largely overblown.It's easy to assume that Microsoft will cut Sony out of the loop and keep Activision's games for itself, but contractual obligations will likely prevent that from happening anytime soon.
For example, many people assumed Microsoft would turn Bethesda's new games into Xbox exclusives right after buying the publisher of Doom, Fallout, and The Elder Scrolls last March. That hasn't happened yet. Instead, Bethesda still launched Deathloop as a timed PS5 exclusive last September, and it will do the same with Ghostwire: Tokyo later this year.
Those releases indicate Bethesda still needs to honor its existing contracts with Sony, even if Microsoft already owns its parent company ZeniMax Media. Sony likely holds similar contracts with Activision for timed exclusives and cross-platform games. In a statement issued to The Wall Street Journal, Sony said that it expected Microsoft to "abide by contractual agreements and continue to ensure Activision games are multiplatform."
Microsoft also doesn't seem to be in a hurry to lock in Activision's games. In a press release, Microsoft's gaming chief Phil Spencer pointed out that Activision's games were "enjoyed on a variety of platforms" and that it would continue to support those communities moving forward.Microsoft and Sony both launched their newest gaming consoles in November 2020, but Microsoft remains an underdog in the console race.
Microsoft has only shipped 11.9 million Xbox Series consoles so far, compared to Sony's 18.0 million PS5 shipments. Sony was also the victor of the previous console generation, with its 116.8 million PS4 shipments easily beating Microsoft's 50.5 million Xbox One shipments.
Activision's Call of Duty 3: Black Ops 3 was the fifth best-selling game on the PS4, with 15.1 million units shipped worldwide. It was also the second best-selling game on the Xbox One with 7.4 million shipments.
That huge gap highlights a dilemma for Microsoft: Would it be smarter to generate stable revenues from PlayStation players with new Activision games, or should it sacrifice those revenues to boost its hardware sales with Xbox-exclusive titles? The first choice makes a lot more sense since Microsoft and Sony both sell their games at much higher margins than their consoles.
Microsoft might eventually launch an Xbox-exclusive Call of Duty game, but it's highly doubtful that Activision will stop selling PlayStation games altogether.Shortly after Microsoft announced its plans to buy Activision, the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) launched a joint review of the country's antitrust merger guidelines.
The timing of that announcement, along with the DOJ and FTC's ongoing probes of other tech giants, indicates Microsoft's takeover of Activision Blizzard -- which will make it the third-largest gaming publisher in the world by annual revenue after Tencent and Sony -- will be closely scrutinized.
Turning Activision's games into Xbox exclusives would likely cause the DOJ and FTC to take a much closer look at the deal, so it makes more sense for Microsoft to remain on good terms with Sony for the time being.
The Wall