Sony Braces for Microsoft’s ‘Pay-to-Win’ Strategy

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Heard on the Street: Sony shares dropped nearly 13% after Microsoft’s announced megadeal for Activision. Its investors are right to be concerned.

The Activision deal—it would be—is a clear statement of the Xbox maker’s intent to invest more in quality videogame content. The transaction would boost Microsoft’s game library, especially in what are known as AAA games—big-budget titles like “Call of Duty.” The technology giant completed its $7.5 billion purchase of ZeniMax Media, the owner of popular game franchises like “Doom” and “Fallout,” last year.

Sony may suffer directly from the deal if Microsoft decides to pull some Activision titles out of Sony’s PlayStation console, making them exclusive to Xbox. Citi estimated that the potential profit hit from losing that royalty income could amount to 10 billion yen to 30 billion yen, the equivalent of $87 million to $260 million. But that is relatively minor: Sony’s operating profit for the 12 months ending in September was around 1 trillion yen.

The bigger worry for Sony investors is how the gigantic deal could shake up the videogame industry writ large. Sony had been leading Microsoft in the console war. A better content library might push more gamers toward Xbox. And Microsoft’s ambitions go beyond consoles. The company has a Netflix-like subscription service called Xbox Game Pass with more than 25 million subscribers. The service is available on personal computers and enables users to stream games on mobile devices over the cloud. The Activision deal could help the service attract gamers across devices. Activision also has a strong presence in mobile games, with top-grossing titles like “Candy Crush Saga” and “Call of Duty: Mobile.

Sony in turn might have to splash more cash to keep up. Shares of game companies in Japan and elsewhere mostly went up on the news. Capcom rose 4.6%, while Square Enix gained 3.7%.

 

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heard Microsoft stock Dec 29th, 2021 342.45 Microsoft stock after the Activision/Blizzard deal Jan 21, 2022 is at 296.03 Sony will be fine and the numbers will go back up as will Microsoft's stock.

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I find it interesting that in any report on the deal, the game that is always named is Call of Duty, not World of Warcraft. End of an era?

SONY, now is the time to buy Nintendo ...

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Acti-blizz is a dinosaur with aging / bubbling / overmonetized IPs… Sony can scoop up multiple gems for 1bn-20bn and be better off with it.

There is no way this gets approved unless Microsoft agrees to make games for all platforms. Probably even HALO.

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