Big War For Activision between Sony And Microsoft, Activision’s Chief Operating Officer starts talking hard about the $69 billion Microsoft merger.
Today, Politico broke a vague (and slightly clickbaity) story that claimed that four anonymous sources inside the FTC had raised the possibility of the significant U.S. regulator filing a lawsuit to stop the agreement with Microsoft and Activision. In reality, Microsoft is trying to invest $69 billion to bring the Call of Duty, Candy Crush, and Warcraft makers under the same umbrella with the hope of strengthening Xbox Game Pass in the battle with Apple or Google’s duopoly of mobile games. Sony and its PlayStation division have been vocally opposed to the deal. Regardless of Microsoft’s promise, it will ensure that Call of Duty will remain on PlayStation “as long as there is a PlayStation remains.”
Some observers, like an industry expert Michael Pachter, the FTC’s argument against the deal is a bid to negotiate the concessions of Microsoft without having to bring the agreement to the court, which Pachter believes will be a disaster and hurt the FTC. There’s no precedent for blocking such a deal. Suppose you properly look at the game industry. In that case, it’s one of the most dynamic and competitive industries, except for Google and Apple’s hold on the mobile app store (an actual monopoly that the FTC should look into).
However, Activision’s CCO recently issued an open letter to us and publicly via tweets indicating that Activision is prepared to defend this Merger in court should it be necessary. Lulu Cheng Meservey explains her belief that Microsoft and Activision have been working closely with the regulators to resolve their issues.
We’re determined to continue cooperating with regulators worldwide to let the transaction take place, but we’ll be ready to fight for the transaction in case it’s necessary. November 24, 2022
There’s no doubt in my mind this deal is likely to go through in the end. Regulators have the right to look into and examine the deal. Regulators from the past failed to be able to discern how Meta’s acquisition of Instagram and WhatsApp might limit choices for consumers and the pace of innovation, for instance, but also permit Google as well as Apple to have an all-encompassing monopoly over the way software is offered on virtually every mobile device around the globe.
Windows, in contrast, is accessible, offering a massive range of rival stores and businesses. Microsoft has often referred to the Google-Apple mobile duopoly when it has responded to regulators, pointing out that it is planning to develop a competitor Xbox mobile app store and believes regulators will eventually push Apple or Google to allow it on their platforms.
In the meantime, as we watch the EU, UK CMA, and U.S. FTC continue to examine the Merger, I’m guessing we’ll be hearing about it for the next few years. Microsoft has previously stated that it would like to conclude the deal by the end of the summer of 2023.
Sony has been burning all its bridges to stop Microsoft’s Activision deal.
The debates over Microsoft’s acquisition of $69 billion from Activision Blizzard have reached new and significant heights since the publication of a lengthy and detailed response written by Sony and then shared by the British authorities’ Competition and Markets Authority (CMA) as part of their ongoing inquiry of the proposed Merger. The short version is that: Sony is now taking shots at everybody, even itself, to derail the deal. Microsoft is, in turn, proudly presenting itself as awful.
Sony’s argument is mostly the same as when we last heard it. It asserts that Microsoft has acquired Activision Blizzard, and the Call of Duty IP, in particular, “poses a threat to an industry that is cherished by millions” at the “critical turning point in the development of the industry.” Sony is presumably talking about the latest console generation and the recent surge in purchases, which is also a significant element. However, it has yet to put an estimated $70 billion on someone.
Call of Duty is currently the most prominent issue of the new phase of the CMA’s probe, which is why it’s been mentioned over a million times here and within Microsoft’s subsequent reply. Sony goes as far as to claim that Call of Duty “is not reproducible.” It is “the benchmark by which the other FPS games are evaluated,” at one point throwing Battlefield under the bus to show that even EA, another major publisher, cannot “produce an alternative in the same way as Call of Duty.”
The Consequences of Duty
What’s changed, usually in a funny way, is Sony’s arsenal of claims to back it up. Let’s begin with the claim that “consumers will be hurt,” which is, at the very least, fair. Sony claims Call of Duty becoming an exclusive Xbox game that, as it believes to be a “short-term” result of the deal, will make PlayStation owners purchase “a comparable Xbox for playing this massively popular game on their preferential device.” Then, in the “mid-term,” this would be believed to force “a large amount of PlayStation gamers” to completely switch between PlayStation or PS Plus to Xbox and Game Pass.
“Faced by competition that was weaker,” Sony continues, “Microsoft could raise the price of games and consoles for Xbox customers (including gamers who had made the switch from PlayStation) and raise the cost Game Pass; increase the cost Game Pass, and reduce quality and innovation.”
In the beginning, the way Sony determines “short-term” impacts, in this case, is unclear. We know that Microsoft has recently offered an arrangement that could allow Call of Duty on PlayStation for as long as ten years but Sony’s reply (dated October 28) states “only up to 2027,” probably based on an earlier offer. (Interestingly, the offer also mentions the possible introduction of PS6 sometime after this time, and Microsoft acknowledges that the new consoles will arrive in 2028.) We also know that an existing agreement with Sony with Activision will stop the franchise from Game Pass for several years, even though Microsoft is determined to add Activision Blizzard games onto Game Pass.
In the event of doubt regarding this fact, Microsoft argues in its most recent research: “With the Merger, Activision content will be made available on at minimum one date and day of subscription services with no Merger and on no. This is important from a consumer security perspective because the more content consumers access through subscription services, the lower the prices for the games. Without the Merger, all consumers who would like to enjoy Call of Duty or another Activision title will need to buy the game for full price.”
Get your face astonished. Make sure you’re shocked because Microsoft declares it is “another illustration of its pro-competitive character.” It is not pro-consumer but rather pro-competitive. It then hysterically states, “in all likelihood, it is the truth that Game Pass has no marketability.”
However, it’s important to point out that primarily because of Game Pass (and its market power), Microsoft could quickly improve Call of Duty to be more affordable or more attractive on Xbox and still allow it to remain only on PlayStation platforms. Pulling something out of the air could take pointers from the myriad PlayStation-exclusive content in Modern Warfare 2, which was the most prominent Call of Duty launch ever on PlayStation.
This could be why PlayStation Plus gets several sections in the response from Sony, with Sony claiming that its subscription service will, in the wake of this agreement, not be able to participate in Call of Duty opportunities and consequently weaken. Sony asserts that this would be passed on to independent developers too, which could “likely be offered lower terms for their work from Microsoft or be forced to guarantee exclusivity” because of the “weakened bargaining place” that is the case with PlayStation as well as PS Plus. The ability to keep Call of Duty on PlayStation and PS Plus is “essential,” Sony says, and is pushing for “a commitment to equality of treatment.”
The conditions don’t seem like the dire situation Sony suggests, but I wonder if Xbox will try to get Game Pass advantages. Microsoft has repeatedly stated that it isn’t planning to keep Call of Duty hostage and prefers to be able to, as Xbox director Phil Spencer puts it, take it on the same level as Minecraft to make it readily accessible. I’m more inclined to agree with Microsoft in this regard, precisely because the company is determined to satisfy regulators like the CMA as well as because its lawyers are aware of the severe punishment they’d be subject to in court if Microsoft would stopped Call of Duty on other platforms, particularly on following of increasing the rules on major tech mergers. Interestingly, the Minecraft analogy is mentioned in this article. Sony states that “Minecraft is a different concept” and “says absolutely nothing regarding “[Microsoft’sstrategies for any future releases for Call of Duty.”
Sony’s claims regarding Xbox increasing prices are also a bit skewed, considering that it was among the first major companies to advocate for games priced at $70 to be released for the next generation console and also recently increased the price of the PS5 in a variety of significant markets. Microsoft has admitted that it might raise the price for the Xbox Series X | S or Game Pass after this season’s holiday. Still, these price increases are likely expected to occur before this Activision contract ends in mid-2023. And that’s predicated on a smooth sailing process that isn’t the case. We’ve seen it thus far.