Microsoft's Acquisition Of Activision, Realizes Sony's Challenges In The Gaming World Are Getting Tougher
JAKARTA – The Sony Group, which is currently still at the top of the world's gaming industry, is facing a new challenge from highly-capitalized competitors who are betting on the explosion of the next generation of online video games. Meanwhile, the Japanese electronics conglomerate is aiming for expansion in various fields, including electric cars.
Microsoft Corp., seemingly sluggish in its console gaming battle with Sony, is now taking big steps to position itself in the "metaverse" world. They want to create an immersive experience where people play games, shop and socialize online. Through a deal worth US $ 69 billion Microsoft acquired the game maker "Call of Duty", Activision Blizzard.
Sony shares reportedly slumped 13% on Wednesday, January 19 amid news concerns about Activision being pulled from the PlayStation system entirely. Understandably Microsoft has an Xbox which will be the only home for Activision game products.
"They're basically trying to build a monster," said Serkan Toto, founder of consultancy Kantan Games in Tokyo. "I don't think Microsoft will spend $70 billion to be the software provider for the Sony platform."
This frontal approach is in stark contrast to Sony, which has made additional deals and won credit for building a network of internal game studios that have produced hits like "Spider-Man" and "God of War." Analysts say it - and other giants - may now feel pressure to make more deals in response.
Microsoft's deal for Activision was made possible by a variety of other businesses, including software and cloud services, with a market capitalization of more than 14 times that of the Japanese conglomerate.
Developers are essentially semi-stressed assets, said Mio Kato, an analyst at LightStream Research who writes on the Smartkarma platform. "It's this backwards nature of Microsoft's strategy that makes us skeptical about their ability to compete with PlayStation," said Kato.
The deal is likely to help Microsoft's aggressive expansion of its Game Pass subscription service, which raises concerns that Sony will be forced to follow suit. Offering games for a flat fee can eat into sales and erode margins.
“Most analysts have been napping during these developments, favoring Sony's stronger film and music businesses to justify higher ratings,” Amir Anvarzadeh, market strategist at Asymmetric Advisors, wrote in a note.
Tech giants including Apple and Amazon have also made their way into the gaming world in recent years, but are still struggling to make a hit.
On the other hand, Sony has a number of titles to look forward to including "Gran Turismo 7" and "Horizon Forbidden West". While Microsoft relies heavily on the "Hello" series, the latest installment of which was delayed before being released in December.
Advances in cloud technology are loosening ties to consoles amid expectations consumers will spend more time playing and shopping in virtual reality and attracting investment from companies like parent Facebook Meta.
The changes have been compared to the shift of the times to electric and autonomous vehicles.
Sony, which plans to launch its next-generation virtual reality headset, is also considering entering the electric car business to capitalize on its advantages in areas including entertainment and chips.
On Wednesday, January 19, shares in gaming companies including Square Enix and Capcom emerged amid speculation that the Activision deal could lead to more consolidation. Sony, the champion of the Japanese electronics industry at a time when many local companies were unable to compete with foreign competitors in various sectors, was seen as one of the potential buyers.
"Sony may be under pressure to do more M&A," wrote Jefferies analyst Atul Goyal in a note, adding that "If there are no regulatory hurdles, then Microsoft could pursue other targets in the not too distant future."