Microsoft’s pending $69 billion acquisition of Activision Blizzard is fast approaching, and as such, the merger is under review from a number of competition regulators around the world. Last week, we heard from various major publishers, who were asked by Brazilian regulators to provide thoughts on the Acti-Blizz acquisition. Perhaps unsurprisingly, Sony was the company most strongly against Microsoft buying the publisher, arguing that Call of Duty was an “essential” franchise in a category all its own. They also argued that adding CoD to Xbox Game Pass would be a tipping point that would make Microsoft an unstoppably dominant force in the subscription service space.
Well, Microsoft has now fired back, and their response to Sony is rather withering (thanks to ResetEra user Iras for the translation of some of these quotes). Microsoft rightfully points out that they’ve committed to still releasing Call of Duty on PlayStation platforms, and thus Sony’s real concern is that they don’t want the Game Pass subscription model disrupting their dominance when it comes to traditional boxed and digital game sales.
“Sony's concern with the potential competition of Game Pass simply reflects the usual resistance of traditional incumbents to competition on merit represented by disruptive players. [...] In short, Sony is not resigned to having to compete with Microsoft's subscription service. Sony's public outcry on subscription games and the company's response are clear: Sony doesn't want attractive subscription services to threaten its dominance in the market for digital distribution of console games. In other words, Sony rails against the introduction of new monetization models capable of challenging its business model.”
Microsoft also argues Sony’s complaints are hypocritical, given they engage in their own competition stifling practices, including paying publishers for “blocking rights” to keep titles off Game Pass.
“Considering that exclusivity strategies have been at the core of Sony’s strategy to strengthen its presence in the games industry, and that Sony is a leader in the distribution of digital games, Sony’s concern with possible exclusivity of Activision‘s content is incoherent, to say the least. Indeed, Microsoft’s ability to continue expanding Game Pass has been obstructed by Sony’s desire to inhibit such growth. Sony pays for ‘blocking rights’ to prevent developers from adding content to Game Pass and other competing subscription services.”
Finally, Microsoft argues that Call of Duty is not in a special category that would require it to be treated differently than other major gaming franchises. Nor is Activision Blizzard as a company, which contributed only two games to the top 20 titles released on PlayStation in 2021.
“Sony is limited to commenting on Call of Duty's brand strength and loyalty and engagement. However, claiming that Call of Duty has a loyal following is a premise from which the conclusion that the game is a "category of games in itself" does not follow. The PlayStation itself has a foundation established by players loyal to the brand. This finding, however, does not lead to the conclusion that the PlayStation – or any branded product with loyal consumers – is a separate market from all other consoles. Extrapolating from such a finding, the extreme conclusion that Call of Duty is a "game category in itself" is simply unjustifiable under any quantitative or qualitative analysis.”
Honestly, Microsoft makes a pretty strong case. Yes, Call of Duty is big, but I don’t think Sony has really made a strong argument that they couldn’t compete without it (when was the last time a Nintendo console had a new core CoD game?) And again, Call of Duty will still be on PlayStation, so it’s pretty clear irritation with Game Pass is Sony’s main motivating factor.
Activision Blizzard has faced a series of lawsuits and other legal action on the heels of a suit filed by California’s Department of Fair Employment and Housing (DFEH) alleging widespread gender-based discrimination and sexual harassment at the Call of Duty publisher. You can get more details on that unfolding story here.
What do you folks think? Are Sony’s complaints about the Activision Blizzard acquisition fair? Or is Microsoft right to shrug them off?