Microsoft Buys Activision Blizzard — a Seismic Shift in Gaming
Why Sony should be worried.
Last Tuesday’s announcement of Microsoft’s $68.7 billion takeover of gaming titan Activision Blizzard was one of those niche news stories that breaks ranks and enters common daily discourse. Water cooler conversations turn from the stock market to… well still the stock market, but this time it’s focused on gaming!
Two years ago I wrote about Microsoft and Sony and the cosmic shift that could be happening between two of the battling powerhouses of the gaming industry. Microsoft’s proposed acquisition of the makers of the Call of Duty franchise puts this story in hyperdrive and starts to really cement Microsoft’s stance in the industry. While Sony has been plugging away as the public’s favorite console, with groundbreaking AAA titles to match, Microsoft has been quietly building the groundwork for a substantial acquisition.
Their acquisition of Bethesda Softworks last year started the trend — an acquisition that amounted to just slightly more than 10% of the value of Microsoft’s acquisition of Activision Blizzard. One of the most beloved third-party gaming studios would move its vast library of titles to Xbox’s Game Pass, all the while assuring that Sony gamers would be well taken care of. But predictably, just months later, Microsoft announced that many of Bethesda’s upcoming releases would not release on Sony’s consoles at all. This isn’t a question of a corporation going back on its word or misleading the public, it’s a shrewd business move that capitalizes on a milestone acquisition.
Similar verbiage surrounding promises that Sony wouldn’t be missing out on big Activision Blizzard franchises has left PlayStation fans weary of the potential of losing out on titles like Call of Duty. For some gamers, this alone is enough of a reason to switch over to the Xbox ecosystem. Phil Spencer has since tried to quell some of PlayStation fans’ greatest fears, but many fans are seeing some of the intentional loopholes of these carefully considered statements and are nervous for the future of their platform of choice.
Despite Sony’s prowess at developing enticing first-party titles for their console, some of their strategies have seemed a little stuck in the past. They haven’t been able to mount a considerable counter to Microsoft’s Game Pass, a service that is clearly intended to leverages its Silicon Valley pedigree for things like cloud integration. Microsoft’s move to more iterative upgrades to their consoles (the iPhone model) versus Sony’s more traditional approach to hyping up their newly powered (and not particularly margin-crushing) machines seems more firmly placed in the modern era.
The purchase of Activision Blizzard marks a monumental step forward in Microsoft’s quest for dominance in western gaming markets. The Call of Duty franchise slotted nicely in position #1 and #2 in the most purchased games for 2021. Moreover, Activision’s marquee titles make up 10 of the 20 best selling games from 2010 to 2019. Despite Sony’s first-party quality, none of their titles has ever come close to dethroning Call of Duty.
The conversation about how the rivalry between Microsoft and Sony is changing now changes massively. Will Microsoft move towards a more subscription-based model? Rather than relying on hardware sales that have historically not shown a huge margin for gaming manufacturers’ bottom line, with many consoles being sold at a loss with the expectation that software sales will bridge the gap. Will we be looking at Sony in a few years and remarking at how old-fashioned they look by repeatedly striving for hardware cycles while Microsoft continues to pluck away on a software-focused strategy that represents the backbone of the company that remains a Silicon Valley giant.
Could it be that we see each company branch so far in different strategic directions that the competition between Microsoft and Sony becomes much like Nintendo’s competition with them — almost not worth comparing. Hyping up new consoles might cause a considerable buzz in the press, but if it doesn’t do very much to push console and game sales forward, perhaps it isn’t worthwhile to these companies. I think it’s almost a foregone conclusion that the generation of consoles following the PS5 and the Xbox Series S/X will break the trend of Microsoft and Sony releasing consoles almost alongside each other.
Sony’s history as a hardware manufacturer and entertainment giant in the movie industry looks to be a part of the DNA of its gaming division: console cycles and blockbuster, movie-like games.
Microsoft’s history in the software space with the Windows operating system seems to point that they’d like to rely on the cloud and acquisitions of established game developers to take care of the games themselves. It wouldn’t surprise me that they’d be pretty happy to get away from releasing a big, exciting console every 5 years.
The international nature of the battle between Microsoft and Sony is part of what is going to make this next chapter interesting. We in the United States might see this as an enormous blow to Sony — and make no mistake, it is. But in spite of Microsoft’s strides onto the main stage of gaming, each Sony console has comfortably outsold Xboxes worldwide. In most parts of the world outside of the US, Sony doesn’t have any competition in the console space. If this acquisition winds up bringing Microsoft into the global realm of competition, it’ll be interesting to see where sales net out. Perhaps Microsoft’s addition to the global market with such a huge acquisition will see it far surpass what Sony has accomplished in recent years, but perhaps the strongly American identity of the studio it acquired won’t be the silver bullet of success for Microsoft to dominate Sony.
But maybe that’s not the goal. It’s certainly not the persona that the Xbox team has shown publicly. I think Xbox is looking for success in spite of Sony, not necessarily in competition with them. And the course that they’ve set for themselves seems to show the same. If you can’t beat ’em, do it a little differently and beat ’em in the process.
