Microsoft's $68.7B Acquisition Of Activision Blizzard And Its Impact On Sony And The Gaming Industry

On the cold winter day or January 18th, 2022, the gaming industry woke up to one of the biggest acquisition news of Microsoft acquiring Activision Blizzard for $68.7 billion. This was a huge deal not just because of the amount Microsoft is going to pay but also because of the game franchises that Activision Blizzard has, which will now be owned by Microsoft or Xbox. The $68.7 billion price tag for Activision Blizzard was calculated based on a price of $95 per share - roughly 45 percent above Activision's stock price before the announcement and the deal is likely finalized in 2023.

Putting the size of the acquisition into perspective, Microsoft paid $7.5 billion for ZeniMax Media the parent company of Bethesda Softworks in March 2021. Back in 2016, Microsoft bought LinkedIn for $26 billion. Bethesda's acquisition gave Microsoft access to big gaming franchises like DOOM, Wolfenstein, Fallout, Elder Scrolls, etc. for its Xbox Game Studio.

Why is this huge?

Apart from the price tag of $68.7 billion, Activision blizzard gives Microsoft access to blockbuster game franchises like Call of Duty, World of Warcraft, and OverWatch apart from other game titles like Diablo, Spyro the Dragon, Starcraft, and Tony Hawk’s Pro Skater along with everybody’s moms favorite Candy Crush Saga. Call Of Duty on its own huge, the first-person shooter which started its journey in 2003, has a big fan following and is consistently in the Top 5 best-selling games across the platforms. With the rise of powerful smartphones, online multiplayer games like Call of Duty are available on mobile platforms as well, but that’s not all, this acquisition also brings the mobile gaming arm – King to Microsoft. While a lot of attention is being paid to the Activision Blizzard part of the deal, it is King studios that gives Microsoft a presence in the mobile gaming arena. The King franchises include Candy Crush, Farm Heroes, Pet Rescue, and Bubble Witch with around 245 million monthly active users as of Q3 2021 across web, social and mobile platforms. In 2020, King reported revenues of more than $2.1 billion. Now with King on its side, Microsoft has a very strong foothold in the ever so lucrative and growing mobile gaming market which, it lacked earlier.

Xbox vs PlayStation

Post the announcement of the acquisition, Twitter, Reddit and Discord were buzzing with speculations and console wars. The controversy surrounding big games titles like Call of Duty, Warcraft and OverWatch is about Microsoft might make these games exclusive to Xbox Gamepass. While Microsoft is within its rights to actually do this, the problem arises when we look at the userbase of the game – Call Of Duty. Lets take Call of Duty : WWII for example for availability of stats, Call of Duty : WWII sold 13.4 million units of the game on PlayStation 4 while Xbox managed less than half of numbers at 6.23 million units. Looking at the cumulative sales data of the last gen consoles – PS4 and XBOX One till June 2021 – PlayStation4 out sold Xbox One by 65.6 million units. PlayStation 4 Total Sales stood at 115,787,816 units while Xbox One Total Sales were at 50,189,746. 

Source: VGChartz 

Moving on to the NextGen consoles – PlayStation 5 and Xbox Series X and S which were launched globally on November 2021, The PlayStation 5 has sold 15.28 million units in 13 months, while the Xbox Series X|S sold 9.84 million units. 

Source: VGChartz 

With a higher number of players on Sony’s PlayStation Platform, if Microsoft plans to make big game titles like Call of Duty, Warcraft, Overwatch, and others, Xbox exclusives It is just not the gamers and the industry that will suffer, the revenue from sales of these games on PlayStation Consoles will stop as well. And since getting your hands on any of these consoles is very difficult at the moment due to high demand and supply chain issues, players may or may not to switch to a different platform.

Xbox GamePass vs Ps Plus

Subscription services are the norm now, Netflix, Amazon Prime, Youtube Premium, Apple Music and Spotify are leading in music and entertainment but when it comes to gaming currently the go-to options are Microsoft’s Xbox Game Pass and Sony’s PlayStation Plus. Both services are essentially game libraries and Game stores that the subscriber gets access to for a monthly fee. But how Game Pass works, is why this is important. Xbox Game pass service gives access to Microsoft-exclusive game titles on the launch day itself without any additional cost, while if you are a PlayStation User with PS Plus, you will have to buy the full game at launch. Games on the other hand are expensive, for example, Call of Duty: Vanguard on PS Store starts from INR 3999 for the base game and goes up to INR 6699 for the Ultimate edition.

The Xbox Game Pass allows the subscribers to play the games at launch, but subscribers don’t get to keep the game in their collection forever. On PlayStation, the PS Plus service offers monthly FREE games along with a collection of games in the library to download and play, these games remain with the user till the time they are subscribed to the service. Then there is the PC gaming market, While we have been primarily talking about Console gaming, Xbox Game Pass works with Windows 10 PC and Laptop as well, because Microsoft makes Windows too.

Exclusive Titles 

Xbox and PlayStation both have a huge library of games, with industry reports suggesting PlayStation coming on top with 299 exclusive game titles while Xbox comes in at half of that number. Sony has been signing up game studio after game studio for exclusives on PS4 and PS5 while Xbox has been focusing on cross-gen play. Sony has even signed up with Activision Blizzard for the latest Call of Duty: Vanguard series to be exclusive on Playstation 4 and 5 for the first year. Having a great game title exclusive to one platform has the ability to pull buyers to that platform.

But as the numbers suggest there are way more PlayStation users in the world compared to Microsoft’s Xbox, and a game not reaching the PlayStation userbase could mean a big loss of revenue for Microsoft.

Will Microsoft Make Activision Blizzard’s Games Exclusive to Xbox?

While there is a lot of controversy around Call of Duty becoming an Xbox Exclusive, Phil Spencer who is Heading Xbox wrote on twitter expressing Microsoft’s “Desire to keep Call of Duty on PlayStation” 

Going by what happened to the Games from Bethesda, it is up to you how you interpret this tweet from Spencer. Meanwhile, an employee Q&A for Activision Blizzard available publicly on the SEC website states “We will honor all existing commitments post-close. As with Microsoft's acquisition of Minecraft, we have no intent to remove any content from platforms where it exists today.”

While this is a positive sign, it remains to be seen whether Microsoft will keep Call of Duty on PlayStation forever or only till the contract between Activision Blizzard ends and Will newer Call of Duty titles be Xbox Exclusive?  This could also mean all games other than Call of Duty could become exclusive Xbox, or maybe DLCs would be Xbox exclusives or even Future Call of Duty versions could be only available on Gamepass.

Sony Spartacus

According to some media reports, Sony apparently is working on a Microsoft XBOX Game Pass alternative of its own. Codenamed – Spartacus, the new multi-tier service is rumored to be a mix of both PS NOW and PS Plus and could allow DAY 1 access to games like the Xbox game pass does. Spartacus is planned for a Spring 2022 launch.

Post Microsoft Activision Blizzard deal, Sony’s stock dropped 13 percent, the largest fall since October 2008 and is estimated to have wiped $20billion from Sony’s market value.