Microsoft and Activision Blizzard Deal Is “Monumental Challenge” for Sony

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Microsoft’s purchase of video game developer Activision Blizzard could pose a serious threat to Sony.

Shares in console maker PlayStation, a major rival to Microsoft’s Xbox, tumbled nearly 13% in Tokyo on Wednesday after Microsoft (MSFT) announced the nearly $70 billion deal. That was the worst fall in Sony’s (SNE) share price since 2008, according to data provider Refinitiv.

Microsoft and Sony have been competing for decades with iterations of their Xbox and PlayStation consoles, often courting video games with unique titles and features.

Microsoft already has successful franchises like “Halo,” but the Activision Blizzard deal would add popular series including “Call of Duty” and “World of Warcraft” to its library — as well as the nearly 400 million monthly active players that accompany.

The transaction would make Microsoft the world’s third-largest gaming company by revenue, behind Tencent (TCEHY) and Sony, the company said in a statement.

“Console wars are heating up,” Amir Anvarzadeh, market strategist at Asymmetric Advisors, wrote in a research note. “Sony will have a monumental challenge on its hands to keep up in this war of attrition.”

Nearly 30% of Sony’s revenue comes from gaming and network services, according to the company’s most recent earnings report. Investors may be concerned that Sony will lose out to Microsoft in gaming content, especially if some of Activision’s titles become exclusive to Microsoft’s systems, according to Kazunori Ito, an analyst at Morningstar Research.

“Acquiring exclusive gaming content is critical,” he told CNN Business on Wednesday, noting that the gaming industry is in a “transition” state as companies adopt subscription models.

Microsoft was already eyeing building its content library, especially during the coronavirus pandemic, when more people stayed home and gaming became an even more compelling entertainment option.

In September 2020, Microsoft purchased ZeniMax, the parent company of Bethesda Softworks, whose studios have produced critically acclaimed franchises including “Elder Scrolls,” “Fallout,” and “Doom.”

While the latest PlayStation 5 is said to be more popular than the Xbox Series X, Sony has lagged behind in launching a true competitor to Microsoft’s Game Pass cloud subscription service, which lets people play a selection of games for a Monthly fee.

Microsoft said on Tuesday that it has more than 25 million Game Pass subscribers and “will offer as many Activision Blizzard games as possible” on the Xbox and PC versions of the service.

Macquarie analyst said that “Sony itself recognizes the long-term limits of a console-centric gaming business”, but adopting a new strategy could require significant investment from the Japanese company.

“We consider its overall gaming/entertainment strategy conservative,” the analysts wrote in a note on Wednesday, adding that it may have been diluted by the company’s “side commitments to other businesses and acquisitions,” including image sensors and electric cars.

“It will be interesting to see if Sony counters Microsoft’s aggressive move with a move of its own, but the prices could be very high,” Macquarie analysts added.

Investors are already betting on which company could be the next to be sold. Wall Street seems to think that Electronic Arts, which makes the wildly popular Madden NFL franchise of football video games, could be the most likely target.

This content was originally created in English.

original version

Reference: CNN Brasil

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