HONG KONG, July 17 (Reuters Breakingviews) – It’s almost a new dawn in the video game industry. After opposing Microsoft’s (MSFT.O) $69 billion purchase of Activision Blizzard (ATVI.O), Sony (6758.T) has signed an agreement to title it Call of Duty. It will help the $2.6 trillion company ease regulatory resistance, but Sony is also benefiting.
It is an unexpected truce between Sony, the maker of Playstation consoles, and its much larger US competitor. Since the latter announced a takeover of Activision in January 2022, the Japanese company has become one of the union’s biggest opponents. The reluctance wasn’t surprising: the merger gives Microsoft’s less-popular Xbox console Activision’s crown jewel, the Call of Duty shooter franchise, which Breakingviews estimates could be worth over $26 billion alone.
Sony and Microsoft have now agreed to keep Call of Duty on Playstation for another decade, after the latter previously struck deals with Nintendo (7974.T) and Nvidia (NVDA.O). Details are yet to be announced and it’s not clear why Sony, which Microsoft previously offered a 10-year deal, changed its mind. Anyhow, Microsoft, which recently defeated US Trustbusters in court, is more likely to get the green light from the UK’s Competition and Markets Authority afterwards, as the regulator feared the buyer would cut off competing consoles. The merger, which expires on Tuesday, will probably have to be extended.
The contract will help Sony in the medium term. Court records suggest that the shooting game generated $1.5 billion in global sales for Playstation in 2021, according to Verge; If you factor in subscription services and other expenses, the total is likely much higher. Sony’s video game division reported $11 billion in digital software and content revenue for the fiscal year ended March. Boss Kenchiro Yoshida can now focus on a longer-term strategy on how to outperform the sector giant.
Yoshida has selectively bought up smaller game studios to improve Playstation content, including spending $3.6 billion on developer Bungie. Sony also plans to spend 300 billion yen ($2.2 billion) on research and development of new titles in the current fiscal year, up 10%, the Nikkei reported last week. The focus is on “live service” games, titles that are continually updated with new content and features, and technologies such as extended reality. Sony may be outclassed by Microsoft, but it has a decent defense for now.
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Microsoft has signed a “binding agreement” with Sony to keep the Call of Duty video game on its Playstation console after the US company acquired Activision Blizzard for $69 billion, said Phil Spencer, Microsoft CEO Gaming, in a tweet on July 16.
Details were not disclosed, but a Microsoft spokesman clarified to various media outlets that the deal has a 10-year term. Separately, on July 14, a US court denied the Federal Trade Commission’s request to block the acquisition.
The deal, the largest in the industry, is yet to be approved by the UK’s Competition and Markets Authority. The competition authority had objected to the deal in April, but said on July 14 that it would extend the period to review the deal by six weeks.
Microsoft’s merger deal with Activision expires on July 18.
Edited by Una Galani and Thomas Shum
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