Sony brings a knife to global video-games gunfight

3 minute read

The Microsoft logo is seen in front of characters from Activision Blizzard games. REUTERS/Dado Ruvic/Illustration

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HONG KONG, Jan 19 (Reuters Breakingviews) - Sony (6758.T) has just been dragged into a fight where it’s heavily outgunned. Investors on Wednesday erased up to 10% of its market value after Microsoft's (MSFT.O) $68.7 billion swoop read more on video-games developer Activision Blizzard (ATVI.O). The Japanese group may lose access to some content but that looks manageable for now. The bigger worry is that Sony is no match against its far-larger rival as gamers look beyond consoles.

Microsoft's purchase, the largest in the industry, is likely to kick off a war for content. The deal will give the Xbox console maker a stable of popular titles from mobile hit “Candy Crush” to the lucrative "Call of Duty" shooter franchise. Already, larger studios are circling smaller peers: Earlier this month, Take-Two Interactive (TTWO.O) snapped up Zynga in a $12.7 billion deal. Titans like Meta (FB.O), Alphabet (GOOGL.O) and Netflix also have ambitions in the sector.

That puts Sony, whose roughly $140 billion market value pales in comparison to its U.S. rival, in a difficult position. The company's low-key strategy of acquiring relatively niche and small studios has helped propel its PlayStation console ahead of the Xbox. But the latter may now gain an edge. Activision's "Call of Duty: Vanguard", for instance, was the second most downloaded title for the PlayStation 5 in North America and Europe last year; analysts at Macquarie reckon the franchise accounts for a "major" portion of Sony's in-game transaction sales. While it's unlikely that Activision's new owner would cut off access, Microsoft will be looking to gradually lure PlayStation gamers to its own console with new content down the line.

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Moreover, the huge bet on Activision signals the company is serious about building a virtual world beyond a console or device. It's notable that "Call of Duty" is among the rare franchises that are not tied to a single platform. In contrast, Sony, which also makes electronics and recently announced plans for an electric-vehicle business, is doubling down on games exclusive to PlayStation. It may have the air of a David and Goliath match-up, but Microsoft looks to be on a whole other level.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

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CONTEXT NEWS

- Sony’s shares fell as much as 10% to 12,830 yen on Jan. 19 following Microsoft's announcement that it will buy video-games developer Activision Blizzard in an all-cash transaction valued at $68.7 billion.

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Editing by Antony Currie and Thomas Shum

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