Xbox: Sony on alert after the takeover of Activision and Call of Duty by Microsoft

Xbox: Sony on alert after the takeover of Activision and Call of Duty by Microsoft

business news Xbox: Sony on alert after the takeover of Activision and Call of Duty by Microsoft

There are the rhetoric and the reality behind it. At the beginning of the year, Microsoft’s takeover of Activision Blizzard was such a shock wave that the giant Microsoft’s competitors inevitably reacted internally to establish a strategy aimed at countering such a behemoth. If the interested parties showed a certain phlegm to display their serenity, certain information tends to prove that the announcement was experienced as an earthquake. And this isn’t 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 attention of the high authorities of Wall Street. Clearly, the displayed smile hid real fears. Today, history is repeating itself with a firm much more powerful than SEGA was in its time.

Sony fears the rise of Xbox

This information is far from coming out of nowhere. As you know, Microsoft’s takeover of Activision Blizzard has been confirmed by interested parties, but is still pending before competition regulators around the world. If the transaction has been confirmed, Microsoft and Activision Blizzard must wait for the return of the various commissions to release the champagne. And precisely the Brazilian commission that interests us here. The latter has hired the services of a law firm whose objective is to verify, point by point, the ins and outs of this mammoth-sized acquisition. Via a series of questions / answers organized with the giants of the sector, they have established a report in Portuguese which has just been made public. 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 of 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 heavy followings. And despite big budgets and resources, none of these developers could create a franchise that would rival Activision’s Call of Duty, which stands out as a category of games in its own right.

By 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 at Xbox.

Xbox: Sony on alert after the takeover of Activision and Call of Duty by Microsoft

And the sequel is even more edifying since it is about Xbox Game Pass.

Over the past five years, Microsoft’s Game Pass has grown to represent 60-70% of the global subscription services 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 that it would acquire ZeniMax in 2020, Game Pass had around 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 lawyers), when Microsoft announced that it would acquire Activision in 2022, Game Pass was at 25 million subscribers – a 38% increase since January 2021 — doubling its annual Game Pass subscription revenue to at least $3 billion.

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

Obviously, the remarks are posed and do not reveal, in appearance, any stress. But just like SEGA and the rhetoric of “ex-partners”, it’s obvious that the acquisition of Activision Blizzard is not taken lightly by Sony – especially if Call of Duty, able to sell consoles by pallets whole, joins the bosom of Microsoft 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 mark of a certain PlayStation VR2.

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