Microsoft’s intentions of sealing its position at the top of the gaming industry have been on hold for some time now, with its deal to acquire Activision Blizzard, one of the world’s largest game studios, being halted by different regulatory bodies. However, the most recent developments seem to have been positive for Microsoft as the company was given the green signal to go ahead with the acquisition in the US. Now the only hurdles it faces are from regulators in the UK.
But why is the Microsoft-Activision Blizzard deal of such prime importance to the entire gaming industry? The maker of Xbox has made big purchases in the past to strengthen its game offerings and the same holds true for other companies that have acquired game studios to bolster their offerings. Activision Blizzard, however, is the creator of the Call of Duty franchise and its acquisition by Microsoft can have a significant effect on competition in the gaming industry.
So, in light of all the controversy that the Microsoft-Activision Blizzard deal has been generating lately, we take a look at all of the developments so far and what this deal means for the average gamer, the community and the industry at large.
Why is Microsoft buying so many game studios?
Microsoft has ramped up its presence in the gaming industry since the release of the Xbox Series S|X consoles in 2020. To counter the Sony PlayStation 5, Microsoft designed these consoles to give players greater access to video games at cheaper prices. Cue the Xbox Game Pass which has been quite effective by offering a vast collection of modern and older popular titles for a nominal monthly fee.
However, rival publishers such as Sony and Tencent have a solid lineup of studios under their belt, churning out platform-exclusive titles. Franchises such as Spider-Man and The Last of Us have been critical and commercial hits, making more players choose the PlayStation camp. That’s not to say that Microsoft doesn’t have its fair share of exclusive titles. The likes of Forza Horizon and Fable are fantastic titles in their own right but they just can’t compete with what Sony’s studios have to offer.
Microsoft, therefore, went on a shopping spree. It decided to acquire some of the world’s most popular game studios to build up a solid collection of exclusive video game titles for the Xbox consoles, the Xbox Cloud Gaming platform and Windows. Some of the big names that are now a part of Microsoft’s kitty include:
- Bethesda Game Studios
- 343 Industries
- Turn 10 Studios
- ID Software
- Machine Games
- Playground Games
- Ninja Theory
- Obsidian Entertainment
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Why has the Microsoft-Activision deal landed in controversy?
Microsoft’s acquisition of Activision has put the entire gaming industry in distress, considering Activision Blizzard is responsible for some of the most popular video game titles across consoles, PCs and smartphones. Activision’s biggest IP, of course, is the Call of Duty franchise, which is a huge revenue generator as well. The mobile version, Call of Duty: Mobile, is free to play and offers a huge opportunity to earn from in-game items. Call of Duty: Warzone is built on the same concept for PC and console gamers, overseeing a huge footfall from gamers around the world.
The Federal Trade Commission of the US was the first one to shout foul play, accusing Microsoft of hampering the gaming industry with the acquisition. It has been alleged that Microsoft’s acquisition could limit popular franchises such as Call of Duty, Overwatch and Candy Crush to the Xbox consoles and Windows.
Despite Microsoft denying any wrongdoing, the regulators further alleged that Microsoft was degrading the gaming experience on other platforms, including consoles from Nintendo and Sony. The FTC also believed that Microsoft could control distribution by delaying access to Activision’s content on other platforms.
The recent proceedings, in this case, saw a US Judge granting a green signal to Microsoft for going ahead with the acquisition, much to the displeasure of the FTC. The FTC then requested a US Court to halt the deal but was again denied.
On the other side of the Atlantic, Britain’s Competition and Markets Authority have different concerns regarding the Microsoft and Activision deal. Their concern is mostly related to the arena of cloud gaming and how this deal could potentially affect the platform’s future.
The EU antitrust regulators also had some apprehensions, but approved the deal in May after Microsoft came up with some remedies to address their concerns.
Sony gives in to the Microsoft deal
Back in January 2022, Microsoft had offered a deal to Sony for retaining all of Activision’s content for a limited period. The deal would let Sony retain “all existing Activision console titles”, including future instalments in the Call of Duty franchise (or any other existing Activision franchise) till December 31st, 2027. Sony rejected the deal at the time. Microsft then offered a different deal to Sony in December 2022, however, that too was rejected.
In the regulatory filings, Sony had clarified its concerns regarding Microsoft making Call of Duty an exclusive title for the Xbox consoles. They also feared Microsoft degrading the gaming experience on its PlayStation consoles.
However, Xbox’s Phil Spencer has now confirmed that Sony has accepted Microsoft’s latest offer. According to the binding agreement, Microsoft will allow Activision’s Call of Duty franchise to remain on the PlayStation consoles for 10 years. Brad Smith, the Vice Chairman and President of Microsoft, tweeted the following:
From Day One of this acquisition, we’ve been committed to addressing the concerns of regulators, platform and game developers, and consumers. Even after we cross the finish line for this deal’s approval, we will remain focused on ensuring that Call of Duty remains available on… https://t.co/hMWjC58wRi
— Brad Smith (@BradSmi) July 16, 2023
It should be noted that the deal doesn’t mention anything about the availability of other Activision titles on the PlayStation. This makes the Sony deal quite similar to the one Microsoft signed with Nintendo. On the other hand, Microsoft’s deals with Nvidia and other cloud gaming services allow the latter to gain access to Call of Duty AND all other Activision titles.
Microsoft-Activision Deal: Is Microsoft being unfair?
That’s a debate for another day.
However, the exclusivity of popular video game titles has existed for a long time in the gaming industry. Nintendo and Sony have been at the forefront of this, withholding their money-minting titles to their consoles only. Nintendo continues to develop games primarily for its Switch consoles whereas Sony’s big draw for the PS5 console comes from the exclusive games from its homebred studios. It was only recently that Sony released some of its popular titles to PC gamers via Steam at discounted prices.
Microsoft’s deal with these studios comes as a shock for its competitors, considering that some of the most popular (and successful) game franchises will now be limited to the Xbox and Windows. Besides Call of Duty, the future of Activision Blizzard’s other titles on rival consoles is likely to be dictated by Microsoft as well. For example, Bethesda’s Starfield will be coming to Xbox and PC gamers as an exclusive, ignoring Sony and Nintendo’s consoles. Bethesda’s prior releases were coming to all major consoles.
How will Microsoft benefit from this deal?
The deal would give Microsoft ownership of some of the most popular video game franchises in the world, including Call of Duty, World of Warcraft and Candy Crush. Having ownership of these games would help Microsoft expand its presence in a crowded market dominated by Sony and Tencent.
Activision Blizzard also has a strong foothold in the mobile gaming segment, with titles such as Candy Crush and Call of Duty: Mobile under its belt. Microsoft could rely on these titles to grow its mobile gaming business and reach a wider audience, eventually gaining a foothold in the mobile market.
Lastly, the deal would give Microsoft some presence in the esports market, which is a booming arena. Activision Blizzard is an organiser of esports events such as the Call of Duty League and the Overwatch League. This deal would help Microsoft expand its esports business and bring a new audience to its Xbox ecosystem.
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Frequently Asked Questions (FAQs)
Answer: Microsoft is buying Activision to gain a strong foothold in the gaming industry.
Answer: Currently, Activision Blizzard isn’t owned by any entity. Microsoft is set to acquire the studio once regulators in UK give their approval.
Answer: The US Courts have given their green signal to the Microsoft and Activision Blizzard deal.
