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Activision-Microsoft deal puts Sony under "huge pressure," experts say

For tens of billions of reasons.

Anadolu Agency/Anadolu Agency/Getty Images

In a landmark deal, Microsoft has announced its intent to acquire the embattled Call of Duty and Overwatch makers at Activision-Blizzard for a staggering $68.7 billion. In addition to the aforementioned franchises, that means the likes of Diablo, Warcraft, Candy Crush, StarCraft and more will all be developed and published under the ever-expanding Xbox Game Studios umbrella.

Even though the partnership isn’t expected to be made official until June 2023, gamers everywhere are stunned by the announcement and brimming with questions about what this seismic shift might mean going forward.

Will future Call of Duty titles become Xbox exclusives? Will Activision’s controversial CEO Bobby Kotick remain at his post once the dust settles? What’s Sony’s next move? For perspective on these ongoing matters, Inverse spoke to three industry analysts for their take on what the future could hold.

A stunning deal

It goes without saying that any deal with a $68 billion deal is enough to shock most games industry watchers to their core, and our trio of analysts was no exception.

“I don't think anyone saw this coming,” says Mike Futter, Founder and Business Analyst at F-Squared. “I don't suspect anyone thought that Microsoft re-evaluating its relationship with Activision Blizzard would lead to this.”

Last November, Microsoft Gaming CEO Phil Spencer emailed employees to say Xbox was “evaluating all aspects of [its] relationship with Activision Blizzard and making ongoing proactive adjustments” following the publisher’s unsavory actions and ongoing employee harassment litigation. Little did we know, those so-called “adjustments” involved buying the company wholesale.

Assuming the new deal clears regulation, Microsoft will take full ownership of these franchises.Microsoft

Kantan Games CEO Dr. Serkan Toto echoed Futter’s sentiment, referring to the acquisition as “an earthquake for our industry” in which “it's hard to find a deal that is even remotely comparable to this one.”

Anti-trust concerns

When the deal is done, Microsoft will officially house a stable of 30 game development studios, with some observers suggesting such a massive reach might be liable for scrutiny under anti-trust legislation in the United States.

Despite those concerns, the experts we spoke to agreed the deal was likely to be finalized.

“Microsoft has managed to avoid the levels of regulatory scrutiny which the likes of Meta currently face, but the size of this acquisition will no doubt turn heads,” says Omdia Principal Analyst George Jijiashvili. “I expect this deal to get a good looking at, but I don’t think it will be blocked on anti-trust laws.”

“The big question is whether massive consolidation is good for consumers, and I'm not sure it is.”

Futter agrees, adding that “this only makes Microsoft the third-largest gaming company by revenue (behind Tencent and Sony). If Disney can buy Fox for $72 billion, I don't see why regulators would balk hard at this deal.”

While acknowledging the deal is likely to clear any legislative hurdles, Toto agrees with the wary reactions from the gaming public.

“Microsoft will become scary big, though, especially in North America, there can be no doubt about that,” he muses.

Xbox exclusives

Will the likes of Call of Duty and Overwatch be barred from running on PlayStation consoles in the years to come? Sources have already told Bloomberg those discussions will happen on a case-by-case basis, with some games remaining playable on Sony platforms featuring additional content exclusive to Xbox.

Futter outlined the benefits and drawbacks of both possible paths.

“Obviously, exclusivity would be a huge boon to Microsoft,” he says of Call of Duty’s impressive PlayStation sales stats. “On the other hand, taking those games off the PlayStation platform would clearly be a lot of abandoned revenue. There is a lot of data we don't have that Microsoft will use to make its decisions about which games to continue publishing broadly and which to make console exclusives.”

In the grand scheme, gaming at Microsoft may stretch beyond the bounds of exclusivity.Microsoft

Toto offered a slightly more definitive take. “Microsoft might play nice in the short run, but I am as certain as I can be that [with enough competitive pressure], that will change. Microsoft did not buy the Call Of Duty brand to make it available to Sony forever.”

Jijiashvili sees exclusivity as merely “a short-term uplift for Xbox,” considering “its long-term aim is to create an all-encompassing, cross-device games ecosystem that goes beyond ownership of an Xbox console.” Over time, Omdia’s analyst believes Spencer and Xbox will shift toward a focus on cloud and subscription offerings that don’t involve hardware.

Sony’s response

As Microsoft balloons in size, perhaps the biggest question that remains is what’s next for its biggest competitor.

“Sony is now under huge pressure to respond,” Jijiashvili says. “The Activision-Blizzard acquisition may force Sony’s hand into making a bold move in relation to its rumored subscription offering. Specifically, we may see Sony including some day-one releases as part of its subscriptions revamp, in its bid to better compete with Game Pass.”

“It’s an earthquake for our industry.”

Jijiashvili also notes that PlayStation VR and entertainment connections may offer unique avenues for expansion as well.

Sony may need more than Spider-Man to compete with Xbox these days.Sony Interactive Entertainment

Futter thinks Sony might respond by making some acquisitions of its own. “I suspect there are some very interesting conversations happening inside of Sony right now. The big question is whether massive consolidation is good for consumers, and I'm not sure it is,” he says. That said, with a much smaller market cap, it’s unclear just how prepared Sony might be to spend the billions necessary to make a splash. Sony purchased Housemarque, Bluepoint, Firesprite and more in 2021, but those smaller studios pale in comparison to the undeniable cache Activision-Blizzard provides.

The problem with Bobby

Beyond Activision’s formidable slate of games, observers remain curious about the fate of embattled Activision-Blizzard CEO Bobby Kotick, who reportedly covered up his company’s history of sexual misconduct for years. Will he be ousted? On the heels of the deal announcement, The Wall Street Journal reported Kotick will make a very profitable exit after the deal closes next year. The analysts we spoke to mostly agreed.

It doesn’t look like there’s too much room for Bobby Kotick on this chart.Microsoft

“That is it for Bobby Kotick, at least in the long run,” Toto says.

However, even if that turns out to be true, Futter cautions it may be a while before Microsoft speaks publicly about it.

“Microsoft and Activision must operate independently until the close of the deal,” Futter says. “There are rules in place to prevent companies from coordinating pre-close. What we heard today is that Kotick will remain CEO of Activision-Blizzard and that entire business unit will report to Phil Spencer in his new role as CEO, Microsoft Gaming. If that changes after the close of the deal, we won't know about it until then.”

With more than a year left to go until the ink on this deal officially dries, we expect many updates to this ongoing story.

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