A Game-Changing Merger: Sony’s Objections to Microsoft’s Pending Acquisition of Activision Blizzard, Inc.

GAVIN STEINBERG—In January 2022, Microsoft Corporation announced its plan to acquire video-game developer Activision Blizzard, Inc. in a deal valued at $68.7B. Activision Blizzard is home to some of the largest gaming franchises including “World of Warcraft,” “Call of Duty,” and “Candy Crush.” Unsurprisingly, Microsoft, the owner of Xbox, was met with immediate pushback from its biggest competitor in the console space, Sony (“PlayStation”). Sony claims that the merger would hinder competition and give Microsoft an unfair advantage. Microsoft conversely asserts that the acquisition will only produce innovations in gaming for the benefit of players and ensure Microsoft’s success in an increasingly competitive industry.        

In particular, the rights to the Call of Duty franchise reside at the center of a tense battle between the two gaming juggernauts. Call of Duty has sold over 400 million units since 2003, and is projected to have a global audience of 250 million. Considering Call of Duty’s popularity, Sony asserts that this acquisition could influence players to switch from PlayStation to Xbox by providing Xbox users with console specific benefits. The first issue important to Sony is Microsoft’s ability to place Call of Duty on GamePass, Xbox’s monthly-based subscription service that allows players to access a catalog of video games. Currently, Sony is in an agreement with Activision Blizzard that prevents Call of Duty from being on GamePass until 2024, a constraint that Microsoft said it would honor. Microsoft now considers this agreement to be hypocritical, especially considering that Sony has its own subscription service, PlayStation Plus, that offers games exclusively on PlayStation.  

But the monthly subscription battle is only the tip of the iceberg. Sony’s true fear lies in Microsoft’s potential ability to make Call of Duty exclusive to Xbox. Microsoft has stated that it does not plan on removing content from Sony players, and that Call of Duty will remain on PlayStation as a paid title. Microsoft has admitted that Sony’s market share for consoles is significantly larger than Microsoft’s, such that it would lose more money than it would gain if it removed Call of Duty from PlayStation. Nonetheless, Sony continues to emphasize its view that the deal is “bad for competition, bad for the gaming industry, and bad for gamers themselves.”

The objections raised by Sony have invited antitrust regulators in the United States, Europe, and Asia to escalate their investigations into the competitive effects of the potential acquisition. The United Kingdom’s Competition and Market Authority, for example, stated the need for a more intensive analysis and expressed concern that the merger could be harmful to both competitors and consumers. 

It is true that, on the one hand, this acquisition may be considered a form of unfair competition, where Microsoft attempts to gain market share in a deceptive way all while disregarding the adverse effects on consumers. But on the other hand, this acquisition also seems to fall under the ordinary competition umbrella. It could be argued that this is simply a move by Microsoft to grow and compete with its biggest adversary and the largest console platform for more than twenty years. These questions should be and will be answered sooner rather than later, as regulators in the United States have already brought suit and the European Union plans to publish its decision by early 2023.