Microsoft’s massive acquisition of gaming giant Activision Blizzard appears increasingly in doubt, which begs the question: What would it be next if it failed?
earlier in the year, Microsoft has outlined plans to acquire Activision Blizzard Inc. for $68.7 billion. The deal is the biggest in video game history and the biggest the tech giant has attempted to date. It comes against a backdrop of massive economic uncertainty, riddled with inflation and general global political instability.
We live in extraordinary times. It can be said that regulators have been almost asleep at the wheel for the past decade. Tech companies have bought huge swaths of their competition to become completely dominant in their own space. Facebook, now known as Meta, bought Instagram and WhatsApp, and basically controls the bulk of Western social media. Google has dominated internet search, with the ability to flood millions of companies on a whim every time they “tweak” their algorithms. Disney, despite its fame in entertainment, has acquired Marvel, Star Wars, Fox, and various other brands with minimal concessions. But playtime may be over.
The era of consolidation may be coming to an end, as “big tech” falls under the microscope among regulators. On Tuesday, the UK’s Competition and Markets Authority (CMA) blocked Meta from acquiring GIF platform Giphy, despite it having previously purchased a series of rising social media platforms. Goldman Sachs also helped the client unload a mountain of Activision Blizzard stock, which sent a very clear signal that there was a lot of suspicion.
Whatever the reason, it seems increasingly likely that Activision Blizzard’s big Xbox deal could be in jeopardy. It begs the question: What’s Microsoft’s next step if the deal fails?
Could the Xbox Activision deal really fail?
It’s starting to look like there’s a real possibility that Microsoft’s big Activision Blizzard deal won’t go through. It comes amid mounting pressure from the UK’s Capital Markets Authority and public skepticism that tech giants such as Microsoft will do the right thing with their acquisitions.
The British regulator issued somewhat laughable document It locates it this month, essentially echoing Sony’s talking points while slandering Microsoft. It’s one-sidedly baffling about the whole affair, as the CMA selectively ignore some facts during its decision. CMA states that Microsoft has “displayed a pattern” of creating exclusive content from studios it acquired for Xbox (shock, horror) – While it has flagrantly omitted cross-platform titles such as Minecraft Dungeons and Minecraft Legends, along with current service games such as Fallout 76 and The Elder Scrolls Online. The CMA’s quest to catch the straws led them to do so midnight project From one of our interim reports – This is a game that does not officially exist.
The CMA also fails to acknowledge that some Microsoft content from Bethesda is still present on Sony’s subscription services today, while claiming that Microsoft will use Call of Duty to “damage” Sony’s position – while ignoring that Sony is and will remain the market leader after its acquisition.
The document hand-writes Microsoft’s assertion that Nintendo is successful without Call of Duty by claiming that Nintendo is not even in competition with Xbox and PlayStation. Presumably, Nintendo is not a competitor in the space due to its focus on “family,” ignoring the fact that the Nintendo Switch has Mountains of violent games and some literally forbidden on Xbox for being too Ecchi (Don’t look for that word at work.)
Why am I railing on the CMA? Primarily to illustrate the organization’s persistent and persistent ignorance of everything related to technology, as well as everything to do with gaming. The first phase of the CMA exam appears to be about hot Twitter stripping rather than actual market data. In theory at least, the second stage should lead to a more in-depth examination of how the deal will affect the UK market.
If anything spoils the deal, it’s most likely a combination of incompetence and projection. Having allowed tech companies to rush with acquisitions for decades, regulators may be re-examining their purpose in a world where Meta has destroyed Instagram and eroded privacy protections on WhatsApp, while Google has become the global arbiter of what you can see online.
Microsoft has described the opposition to the CMA as “misplaced” and, frankly, there is no better word to describe it. Unlike search engines and social media, the gaming industry is lively and competitive, with plenty of room for young, up-and-comers to disrupt the industry. The same cannot be said for many other nascent regulators of the internet industries, who have failed to do so, you knowregulate – but I digress.
There is no guarantee that the deal will fail, of course. Microsoft could make compromises, like a firm contractual commitment to keep Call of Duty on PlayStation in perpetuity, for example. But let’s say the deal doesn’t go through for whatever reason, so what’s next for Xbox?
If it fails, what can Microsoft do next?
The phrase “be careful what you wish for” comes to mind in relation to this whole situation, as I feel that PlayStation’s involvement with regulators has given Microsoft a mandate to take off the gloves and go back to the violent days of the Xbox 360 era.
For years, Microsoft acted as a company that wanted to coexist with PlayStation for the benefit of the industry at large. Microsoft continues to support Minecraft, Fallout 76, The Elder Scrolls Online, and other games that preceded the acquisitions. Meanwhile, Sony has built a reputation for carving out exclusive parts of games like Destiny and Call of Duty at the expense of Xbox and PC players. This has extended to entire franchises such as Final Fantasy with ambiguous exclusivity periods that create confusion for Xbox customers.
I don’t envy Sony for doing this – it’s all work at the end of the day. Here I am speaking analytically. The only horse I own in this race personally, as a fan, is Blizzard, which I want to free from its CEO, Bobby Kotick. Coty, who is still at the helm of the company, reportedly oversaw the “brother boy” culture and was aware of the sexual harassment allegations. That led to an ongoing lawsuit in California courts.
I also hope to see dormant Activision Blizzard franchises revived, such as Starcraft or Guitar Hero, As noted by Phil Spencer, CEO of Microsoft Games. Activision Blizzard today is a price gouging game that chases trends and leaves mountains of beloved IPs dead because it only makes millions instead of billions.
That’s the organizational irony here, really. Players, regardless of platform, will benefit from this deal, with more games across more platforms. It can be argued that Activision Blizzard employees will also benefit, given that Microsoft has indicated a quite relaxed attitude towards unions. But for whatever reason, the regulators seem intent on preserving the status quo precisely for the sake of the Sony PlayStation.
Sony may end up regretting getting involved. In a world where regulators have sat down for Microsoft and are told that Sony’s way of doing business is the right way, Sony can inadvertently move into a situation where it loses bidding wars over content left, right and center.
Microsoft could easily get a Call of Duty marketing deal out of Sony. An Xbox console holder can dump a pile of cash in Square Enix for exclusive Final Fantasy games. It could put in millions of dollars to create franchises like Monster Hunter, Grand Theft Auto, Persona and who knows what else, timed Xbox exclusives. Tencent can take strategy, seize strategic and influential positions in companies by buying shares on PlayStation account.
The company would have $70 billion to play with, after all. Plus, in this inflationary economic climate, acquiring that cash is important. With the gloves off, Microsoft could completely change its tactics, and the regulators would essentially give it the mandate to do so.
The faltering deal could end up getting worse for PlayStation and consumers in general
Microsoft could easily create a climate where PlayStation players end up being denied more games than they would have been if Microsoft were simply allowed to complete the acquisition – and there will be few regulators who can step in here as it will just be business deals between Two free companies.
I wrote it before Sony knows Microsoft won’t remove Call of Duty from PlayStation. There is Minecraft as a prime example, withdrawing a lot of money left on the PlayStation, moreover, it is not the bad guy. Microsoft was attacked by the media for taking a timed exclusive deal on 2015’s Rise of the Tomb Raider a few years ago, and hasn’t reconsidered that approach since. However, this whole ordeal may leave her with few options if she is to still be competitive.
Literally, no one wants to see Call of Duty away from the PlayStation.
The message regulators might end up sending here is to “do business like Sony”. While telling Activision employees, “No, you deserve no better.” It also tells Activision back catalog fans to accept an endless cycle of Call of Duty, Call of Duty, Call of Duty, to keep the money coming in. It suggests little hope for the return of Starcraft, Guitar Hero, Prototype, or other classic franchises.
Perhaps most egregiously, the CMA seems intent on preventing consumers from getting a better deal Xbox Game Pass – Despite the fact that this is the reason for the existence of the whole body. The CMA says that PC and Xbox players should pay $70 for Call of Duty instead of $10. And why? Simply because the market leader chose not to compete. It amounts to dereliction of duty at best, but that seems to be on par with the course every time a government body takes even the greatest interest in the video game industry.
But hey, if that’s what the regulators want, Microsoft might play its game. If Microsoft is forced to compete on Sony’s terms, this could be a world in which Sony might find itself regretting its existence.
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