Xbox: Sony on alert after Microsoft’s takeover of Activision and Call of Duty

business news Xbox: Sony on alert after Microsoft’s takeover of Activision and Call of Duty

There is the rhetoric and the reality behind it. At the beginning of the year, Microsoft’s acquisition of Activision Blizzard was such a shock wave that the giant Microsoft’s competitors inevitably responded internally to establish a strategy aimed at countering such a giant. If the interested parties showed some slime to show their equanimity, certain information tends to prove that the announcement was experienced as an earthquake. And it’s not the first time this has happened…

A sense of deja vu

Twenty years ago, when SEGA decided to leave the world of console manufacturers, the publishers communicated by welcoming the now new publisher with welcome messages. But for some, like Electronic Arts, it was window dressing. Because the moment SEGA announced its intention to become one of the main publishers, the new competitors simply organized crisis meetings! And the American publisher went even further by writing a salty letter to the high authorities on Wall Street. It is clear that the smile displayed hid genuine fear. Today, history repeats itself with a company that is much stronger than SEGA was in its day.

Sony fears the rise of the Xbox

This information comes far from nowhere. As you know, Microsoft’s takeover of Activision Blizzard has been confirmed by interested parties, but is still awaiting competition regulators worldwide. If the transaction has been confirmed, Microsoft and Activision Blizzard must wait for the return of the various commissions to release the champagne. And it is precisely the Brazilian commission that interests us here. The latter has hired the services of a law firm whose aim is to verify, point by point, the ins and outs of this huge acquisition. Through a series of questions/answers organized with the giants of the sector, they have established a report in Portuguese, which has just been published. And when we look at the case of Sony, some answers are far from going unnoticed. See instead:

Creating a high-end AAA game (like Activision’s Call of Duty) requires a budget of hundreds of millions of dollars and thousands of employees. Competitors to Microsoft and Activision in terms of game development and publishing include SIE, Nintendo, EA, Ubisoft, Epic Games, Riot Games, Warner Brothers Interactive, Rockstar and Take-Two (owner of Rockstar and 2K). Nevertheless, apart from Activision, there are few developers/publishers capable of producing AAA games like EA (FIFA), Take-Two/Rockstar (Grand Theft Auto) and Epic Games (Fortnite). These games tend to be long-running franchises with big budgets, multi-year development cycles, and large followings. And despite large budgets and resources, none of these developers could create a franchise that would compete with Activision’s Call of Duty, which stands out as a category of games in itself.

In these few lines, we discover that Sony takes the Call of Duty franchise very seriously, which is an important part of its catalog, and possibly fears a future exclusivity of it on Xbox.

Xbox: Sony on alert after Microsoft's takeover of Activision and Call of Duty

And the sequel is even more buildable since it’s all about Xbox Game Pass.

Over the past five years, Microsoft’s Game Pass has grown to represent 60-70% of the global subscription market. This share is even higher in Brazil, where Game Pass accounts for around 70-80% of the PC subscription services market. When Microsoft announced it would buy ZeniMax in 2020, Game Pass had about 10 million subscribers. Even if each subscriber purchased the cheapest subscription ($10 per month), that equates to over $1.2 billion in annual subscription revenue. As the graph below shows (Editor’s note: in the document presented to the attorneys), when Microsoft announced it would acquire Activision in 2022, Game Pass had 25 million subscribers — up 38% since January 2021 — doubling its annual Game Pass subscription income to at least DKK 3 billion

Reading between the lines, we understand that Sony fears the rise of Microsoft and Xbox Game Pass. The producer realizes that the increase in subscribers is pronounced and that it will not decrease. Further down the line, the report points out that this rise in power coincides with interest in content made possible by the acquisition of several studios: Double Fine, Obsidian Entertainment, Ninja Theory and even Bethesda. And that with Activision, the content would be greatly improved.

It is clear that the remarks are quiet and do not, in appearance, reveal any stress. But like SEGA and the rhetoric about “ex-partners”, it’s clear that the purchase of Activision Blizzard will not be taken lightly by Sony – especially not if Call of Duty, capable of selling consoles by the pallet, joins Microsoft’s shot in an exclusive way. It will be interesting to see how the Japanese company responds to new challenges in the coming months and years. The first answer was given by the arrival of Extra and Premium subscriptions, and the second could well bear the stamp of a certain PlayStation VR2.

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