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 Microsoft Corp, a laggard in
the generational console battle with Sony, took
a major step to position itself for the "metaverse"
- a proposed immersive experience where people
game, shop and socialise online - with a $69
billion deal for "Call of Duty" developer
Activision Blizzard.
Sony's shares slumped 13% on Wednesday amid
concern Activision titles would be pulled from
PlayStation systems.
"They're basically trying to build a monster,"
said Serkan Toto, founder of the Kantan Games
consultancy in Tokyo. "I don't think Microsoft
is spending $70 billion to become a software
provider for Sony platforms."
The full frontal approach contrasts with Sony,
which has made incremental deals and gained
praise for building a network of in-house gaming
studios that have produced hits such as
"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 is made possible
by its vast array of other businesses, including
software and cloud services, with its market
capitalization more than 14 times that of the
Japanese conglomerate.
Many observers see Activision as a tarnished
business after allegations of sexual harassment
and misconduct by managers and with its major
franchises losing momentum, analysts say.
The developer is "basically a semi distressed
asset," said Mio Kato, an analyst at LightStream
Research writing on the Smartkarma platform.
"This backward-looking nature to Microsoft's
strategy is what makes us sceptical about their
ability to compete with PlayStation."
PRESSURE TO CONFORM
The deal will likely aid Microsoft's aggressive
expansion of its Game Pass subscription service,
which raises concerns Sony will be forced to
follow suit. Offering games for a flat fee can
eat into sales and erode margins.
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 "Most analysts have been
napping during these developments, cheering
Sony's stronger movies and music business to
justify a higher rating," Amir Anvarzadeh, a
market strategist at Asymmetric Advisors, wrote
in a note.
Tech giants including Apple and Amazon have also
advanced into gaming in recent years, but
struggled to deliver hits.
Sony, by contrast, has a pipeline of hotly
awaited titles including "Gran Turismo 7" and
"Horizon Forbidden West". Microsoft has leaned
heavily on the "Halo" series, whose latest
instalment was delayed before release in
December.
Advances to cloud technology are loosening ties
to consoles amid expectation consumers will
spend more time playing and shopping in virtual
reality and attracting investment from firms
like Facebook parent Meta.
The change has been compared to the epochal
shift to electric and autonomous vehicles.
Sony, which plans to launch a next generation
virtual reality headset, is also considering
entering the electric car business to take
advantage of its edge in areas including
entertainment and chips.
On Wednesday shares in gaming firms including
Square Enix and Capcom popped on speculation the
Activision deal could lead to more
consolidation.
Sony, a Japanese industry champion at a time
when many local firms are losing ground to
overseas rivals across a swathe of sectors, is
seen as one potential buyer.
"Sony may come under pressure to do more M&A,"
Jefferies analyst Atul Goyal wrote in a note,
adding that "if there are no regulatory
bottlenecks, then Microsoft may go after another
target in the not too distant future."
(Reporting by Sam Nussey. Editing by Gerry
Doyle)
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