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Wednesday, January 19, 2022
Microsoft's purchase of Activision Blizzard could hurt Sony and Nintendo players
The video game industry is consolidating. Need proof? Look no further than Microsoft’s (MSFT) decision to buy “Call of Duty” maker Activision Blizzard (ATVI) for $68.7 billion. The move, if it closes as planned in 2023, will make Microsoft the world’s third largest gaming company by revenue, behind Tencent and Sony, and give it a significant mobile gaming presence.
Just last week, Take-Two Interactive (TTWO), the company behind games like “Grand Theft Auto;” “Red Dead Redemption;” and the “2K” series, announced its purchase of mobile gaming giant Zynga (ZNGA) for $12.7 billion.
Sony (SONY), meanwhile, bought six game studios in 2021, including Valkyrie Entertainment for an undisclosed sum.
And let’s not forget Microsoft’s $7.5 billion purchase of Zenimax or Nintendo’s acquisition of “Luigi’s Mansion 3” developer Next Level games last year.
Studios and publishers being bought up isn’t new, and the Activision Blizzard move will be a boon to Microsoft, allowing it to better build out its Game Pass cloud service and mobile gaming operations. But it could also hurt gamers in the long run, forcing them, more than ever, to choose between Microsoft, Sony, or Nintendo, as the console makers increasingly snatch up third-party developers and publishers.
“When so much of gaming is owned by so few organizations, [it] makes me nervous,” Forrester analyst Will McKeon-White told Yahoo Finance.
Greater consolidation could cut off gamers from their favorite titles
Microsoft’s purchase of Activision Blizzard and last year’s acquisition of Zenimax means that some of the most beloved and most played properties in gaming will be now under one roof when the deal closes. “Call of Duty,” “Elder Scrolls,” “Fallout,” “Overwatch,” “World of Warcraft,” all call Microsoft home.
If you’re a Microsoft player, that’s great news. It means that all of those titles will appear on Xbox, or at least continue to be available on your PC for years to come. If you’re a Nintendo or Sony player, though, the deal could deprive you of your favorite games.
Console makers have always used exclusive titles from their own studios to get gamers to purchase their devices. Think “Halo” on the Xbox, “Uncharted” on PlayStation, or “Super Mario Bros” on the classic Nintendo Entertainment System. The console makers closely guard these first-party titles, ensuring you can play them only on their systems.
As a result, third-party developers and publishers play a huge role in the gaming industry by giving gamers titles to play regardless of the system they own. For example, you can play Take-Two Interactive’s “Grand Theft Auto” or EA’s “Madden” series regardless of whether you own an Xbox or PlayStation.
Yes, some outliers are too graphically intensive to run on Nintendo’s Switch; other timed exclusives will be released on one console weeks or months before another. But third-party studios traditionally seek to get their games on as many services as possible. After all, the more gamers you reach, the more money your game will make.
As the industry consolidates, though, titles that were previously third-party games will become first-party exclusives. Microsoft already made that clear when it purchased Zenimax and announced the highly anticipated “Starfield” will be an Xbox and PC exclusive.
For PlayStation gamers, that means if you want to play one of the most hyped games in years, you’ll need to buy an Xbox, sign up for Microsoft’s Game Pass, or get a gaming PC. Current generation consoles, if you can even find them now, cost as much as $499.
There’s no word yet on what Activision Blizzard games Microsoft will make exclusive to its platforms. It’s hard to imagine it would cut PlayStation gamers off from a cash cow like “Call of Duty: Warzone,” but we still don’t know whether games like the upcoming “Overwatch 2” will come to all consoles.
Microsoft is moving to take over cloud, console, and mobile gaming
Microsoft, of course, has reason to buy up a huge company like Activision Blizzard. Three reasons, actually. It means that gamers will flock to the tech giant’s latest Xbox Series consoles; it makes the company’s Game Pass service even more appealing; and it immediately gives Microsoft a presence in the fast-growing mobile gaming category.
Selling consoles is a must for Microsoft to make up for the cost of developing them in the first place, and mobile gaming will allow the company to reach gamers around the world who don’t have access to high-end PCs or consoles.
But it’s Game Pass that holds the most promise for the company. At $14.99 per month, the service gets gamers access to more than 100 games, as well as the ability to play games on smartphones, tablets, laptops, and smart TVs via the cloud.
Microsoft is angling to make this a kind of Netflix for gaming, and adding Activision Blizzard’s titles makes it all the more appealing. Of course, that gives Microsoft even more incentive to cut out Sony and Nintendo users.
The Microsoft-Activision deal doesn’t have to be inherently bad for gamers. And it only makes sense for Microsoft to try to make the most out of the deal by making some titles exclusive. But if it cuts games from competing consoles off entirely, it will hurt players and the industry as a whole.
By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley
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