Sony brings a knife to the global video game shootout

HONG KONG, Jan 19 (Reuters Breakingviews) – Sony (6758.T) has just been dragged into a fight where it is vastly outmatched. On Wednesday, investors wiped off as much as 10% of its market value after Microsoft’s $68.7 billion hit (MSFT.O). Learn more about video game developer Activision Blizzard (ATVI.O). The Japanese group may lose access to some content but it seems manageable for now. The biggest worry is that Sony won’t measure up to its much bigger rival as gamers look beyond consoles.

Microsoft’s purchase, the largest in the industry, is likely to spark a content war. The deal will give console maker Xbox a stable of popular titles ranging from the mobile hit “Candy Crush” to the lucrative shooter franchise “Call of Duty.” Already, bigger studios are circling smaller peers: Earlier this month, Take-Two Interactive (TTWO.O) snapped up Zynga in a $12.7 billion deal. Titans like Meta (FB.O), Alphabet (GOOGL.O) and Netflix also have ambitions in the sector.

This puts Sony, whose market value of around $140 billion pales in comparison to its US rival, in a difficult position. The company’s low-key strategy of acquiring relatively small, niche studios helped propel its PlayStation console ahead of the Xbox. But the latter can now gain an advantage. Activision’s ‘Call of Duty: Vanguard’, for example, was the second most downloaded title for the PlayStation 5 in North America and Europe last year; Macquarie analysts believe the franchise accounts for a “significant” portion of Sony’s in-game deal sales. While Activision’s new owner is unlikely to cut access, Microsoft will be looking to gradually lure PlayStation gamers to its own console with new content down the line.

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Additionally, the huge bet on Activision indicates that the company is serious about building a virtual world beyond a console or device. It should be noted that “Call of Duty” is one of the few franchises that are not tied to a single platform. In contrast, Sony, which also makes electronics and recently announced plans for an electric vehicle business, is doubling down on its PlayStation-exclusive games. It may look like a match between David and Goliath, but Microsoft seems to be on a whole different level.

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BACKGROUND NEWS

– Sony shares fell 10% to 12,830 yen on Jan. 19 after Microsoft announced it was buying video game developer Activision Blizzard in a cash deal valued at 68.7 billion dollars.

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Editing by Antony Currie and Thomas Shum

Our standards: The Thomson Reuters Trust Principles.

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