Here is the latest update in the divine comedy that is the Activision Blizzard King – Microsoft merger.
Over a year ago, we reported that tech giant Microsoft had been making moves to acquire Activision Blizzard King (ABK) for a cozy $68.7 billion USD. What started out as the largest acquisition of a tech company in US history, has turned out to be a frequent source of entertainment and lasting headaches for industry enthusiasts.
While acquisitions like these happen all the time, we haven't one at this scale. But here are the short details:
After ABK got under fire in 2021 in the wake of a sexual harassment lawsuit, controversial CEO Bobby Kotick was looking for a way out. This came in the form of a phone call from Xbox boss Phil Spencer who after some back and forth offered to buy the entire company under the Microsoft banner to integrate them into their Xbox ecosystem.
This gave much hope that Bobby Kotick, who is still with ABK as of writing, would also leave the company after Microsoft took over. Kotick and his team have been notorious for union busting (something Microsoft seems to oppose) and ignoring several cases of sexual harassment and misogyny. Something we encourage you to look up.
Acquisition by Mircosoft is seen by some as a ‘Get out of Jail, Free' card for ABKs upper management as some of those lawsuits are still ongoing.
But Microsoft and ABK forgot about Sony Interactive Entertainment (SIE) and the various trade commissions worldwide. And while both SIE and the trade commissions like to throw the term consumer around, this acquisition being blocked at all fronts seems to be more about protecting SIE's bottom line and politics.
SIE CEO Jim Ryan has been flying around the world since then, trying to get this acquisition blocked on all levels. The reason? Call of Duty.
While ABK is the license holder of many high-profile gaming IPs, most of them pale in comparison to their workhorse Call of Duty. And who can blame Sony for being worried? The latest entry, Call of Duty: Modern Warfare II (2022) made $1 billion USD within 10 days. A sizeable number of those are on PlayStation platforms.
SIE's fear is now that Microsoft could potentially hold two of the biggest IPs in gaming (the other being Minecraft). And that Microsoft will inevitably bring Call of Duty to their Game Pass subscription service, making Microsoft platforms more lucrative to consumers.
Microsoft has offered SIE a 10-year commitment, promising that SIE and PlayStation would keep access to Call of Duty for the next 10 years. A similar commitment has already been signed by Nintendo and offered to Valve's Steam storefront. Valve CEO Gabe Newell didn't think it would be needed as they always had a great business relationship with Microsoft.
SIE has continuously rejected the offer with statements such as the following:
Microsoft might release a PlayStation version of Call of Duty where bugs and errors emerge only on the game’s final level or after later updates.
Even if such degradations could be swiftly detected, any remedy would likely come too late, by which time the gaming community would have lost confidence in PlayStation as a go-to venue to play Call of Duty. Indeed, as Modern Warfare II attests, Call of Duty is most often purchased in just the first few weeks of release.
If it became known that the game’s performance on PlayStation was worse than on Xbox, Call of Duty gamers could decide to switch to Xbox, for fear of playing their favourite game at a second-class or less competitive venue.
After several investigations have been launched against them by the European, US, and UK trade commissions, Microsoft asked that Sony should reveal the details of timed exclusivity contracts SIE holds with publishers.
Thanks to the investigations we know that Game Pass really eats into Microsoft's sales profits, as most titles are included in the subscription service.
In the light of a new investigation report commissioned by the CMA (The UK Trade Commission) which you can read in full here, Lulu Cheng Meservey who's the EVP of Corporate Affairs and CCO of ABK has revealed the following:
The CEO of SIE answered that question in Brussels.
In his words:
"I don’t want a new Call of Duty deal. I just want to block your merger.”
— Lulu Cheng Meservey (@lulumeservey) March 8, 2023
But it looks like the CMA and European Trade Commission will vote to pass on the acquisition. Meanwhile, the US FTC is gearing up to file for an official lawsuit to block one of the biggest acquisitions in history. But while they'll also have SIE whisper into their ears, their decision seems to be more politically motivated.
As the FTC fairly recently has undergone a restructuring and made promises to enforce more regulation for the sake of consumers. Their steps seem to be motivated by the potential to make a statement blocking such a big international acquisition, then trying to protect consumers.
Until then, business for gamers will go on as usual. We'll, of course, keep you updated if anything more comes to light here on ESTNN.