Occurred at the beginning of the year, the acquisition of Activision Blizzard by Microsoft for 70 billion dollars was a true earthquake in the industry. With the transaction confirmed, there are still many steps to go before Activision Blizzard is finally under the leadership of Microsoft, and the acquisition must be approved in particular by competition authorities around the world. The results of one of the commissions based in Brazil have just been released and contain a lot of very interesting information regarding the opinion of the main groups in the sector on the takeover bid in question, in particular that of Sony.
For Sony, Microsoft would take a big advantage with this acquisition
A Brazilian law firm was responsible for this survey of many technology multinationals, all of which answered a dozen questions. The documents, entirely written in Portuguese, have just been made public and we share Sony’s words with you today.
The Japanese giant, Microsoft’s main competitor, has been in the spotlight for several months after the announcement of this record acquisition, but also after other acquisition rumors in the video game industry.
First, Sony talks about the difficulty of creating one of the big budget AAA games as popular as Call of Duty in the video game industry. Such developments require a colossal budget of several hundred million dollars, and according to Sony, no current player in the industry would have the chance to create a potential rival to Call of Duty, established for years.
“Making a high-end AAA game (like Activision’s Call of Duty) requires a budget of hundreds of millions of dollars and thousands of employees. »
“Microsoft’s and Activision’s competitors in 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). However, in addition Within Activision, there are few developers/publishers capable of producing AAA games, such as EA (FIFA), Take-Two/Rockstar (Grand Theft Auto), and Epic Games (Fortnite) These games tend to be long-running franchises with big budgets , multiple one-year development cycles, and a fanatical following. And despite huge budgets and resources, none of these developers were able to create a franchise to rival Activision’s Call of Duty, which stands out as a gaming category in its own right. “.
Therefore, Sony claims that the presence and cultural impact of Call of Duty in video games and popular culture gives it a unique and almost impossible place in this sector. The license benefits from a loyal and diligent community that wouldn’t jump ship even if another studio had the chance to offer an FPS equivalent to Call of Duty.
Later in the document, Sony discusses Xbox Game Pass and the place of subscription services in video games today. This evolution in the consumption of video games has created a real competition with the sale of complete purchased games, once and for all, which is in sharp decline. Sony believes that the lower initial costs of subscription services could be anti-competitive with publishers recouping large investments in games by selling them for an initial sum. By extension, Sony considers that this may negatively impact the quality of video game creations.
“Over the past five years, Microsoft’s Game Pass has grown to capture approximately 60-70% of the global market for subscription services. This share is even higher in Brazil, where Game Pass represents around 70-80% of the PC subscription services market. When Microsoft announced that it would acquire ZeniMax in 2020, Game Pass had around 10 million subscribers. Even if each subscriber purchased the cheapest tier ($10 per month), that equates to more than $1.2 billion in annual subscription revenue. As the chart below shows, when Microsoft announced it would acquire Activision in 2022, Game Pass had 25 million subscribers, a 38% increase from January 2021, doubling its annual Game Pass subscription revenue to at least $3 billion. »
Finally, Sony attributes the success of Xbox Game Pass to its ability to offer very different games to reach a wide audience. Acquiring studios with varied skill sets has been hugely beneficial for Microsoft, with the Japanese giant taking cues from Double Fine, Obsidian Entertainment, Ninja Theory, and Bethesda. By adding Activision to the equation, Microsoft could create a turning point in the video game industry and gain a considerable advantage over its competitors.
“Content, as the main driver of purchasing decisions, is the most important barrier to establishing a digital distribution channel for PC, console and mobile games. A successful digital distribution channel will need to offer a wide range of differentiated content (for example, different genres and different prices). One of the reasons Microsoft’s Game Pass has grown so quickly is because Microsoft has acquired several third-party studios since 2017, including Double Fine, Obsidian Entertainment, Ninja Theory, and Bethesda, and added their content to Game Pass. Such acquisitions gave Microsoft a greater amount of content, even without Activision’s games. Add Activision games to that and the content would represent a game changer. »
Today, Sony says that a potential Xbox Game Pass competitor would take several years to become a worthy rival. While Call of Duty still represents a significant source of revenue for Sony, the acquisition by Microsoft would hurt Sony’s development.
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