Sony’s strategy of focusing on their own games has been challenged with the Microsoft acquisition of Activision. There are now one less competitor in this space, and it is possible that Sony may be forced to change its model – or face extinction.
“Sony’s Videogame Strategy Challenged by Microsoft’s Deal for Activision” is a news article about how Sony’s game strategy has been challenged by Microsoft’s deal for Activision. The article goes on to discuss the issues involved with the deal and how it could affect Sony.
TOKYO — Sony Corporation (Sony) is a Japanese multinational corporation headquartered in Tokyo. SONY -1.76 percent finds itself in a situation that many gamers may relate to: reaching the pinnacle of achievement only to realize that an old nemesis is still lurking around—and becoming stronger.
The $75 billion purchase of videogame producer Activision Blizzard Inc. ATVI -0.50 percent by Microsoft Corp. MSFT -1.85 percent would give it control over some of the world’s most popular titles. Sony must decide how to improve its own software catalog, whether to continue emphasizing hardware, and what to do with the metaverse, which consists of three-dimensional virtual worlds inspired by realistic videogames.
Activision gaming titles such as Call of Duty and World of Warcraft are expected to be the future foundation of Microsoft’s Game Pass service, which provides an all-you-can-play menu of games for $10 per month. Game Pass competes with Sony’s PlayStation Plus program, and Microsoft’s focus on software highlights the differences with Sony, which still prides itself on cramming the most cutting-edge hyper-realistic graphics capability into a proprietary box like the PlayStation 5.
In the last eight years, Sony’s stock price has increased eightfold, making it one of the most successful periods in the company’s 76-year history. The news about Microsoft sparked a rare selloff, with Sony shares falling nearly 13% on Wednesday before recovering 5.8% the next day. To stay on top, organizations must adapt to a digital environment in which more companies are establishing direct relationships with customers via subscription services like Netflix, Apple Music, and Amazon Prime.
Sony Pictures Entertainment, the company’s video content division, has adopted an arms-dealing approach to selling to all parties, including selling streaming rights to the long-running comedy “Seinfeld” to Netflix Inc.’s platform. Non-Sony sites, like as Spotify, are where Sony Music artists like Adele may be found.
Netflix bought the streaming rights to ‘Seinfeld’ from Sony’s video entertainment division.
Photo courtesy of Columbia Tristar/Everett Collection
Sony is closer to the Netflix model in the gaming industry, owing to PlayStation Plus, which is marketed directly to players. That company has been touted by investors as a major cause for the stock’s rise.
Videogames used to account for an eighth of sales at a firm that still depended on television sets and portable music players a decade ago. Sony’s main division now is games and network services, which account for over a third of sales and operating profit.
In January, Sony CEO Kenichiro Yoshida talked at the CES Technology show about creating more “social entertainment places” that combine Sony’s capabilities, such as virtual watching of a soccer game or electric cars with full-scale videogames for passengers. Sony’s approach in the wake of the Microsoft purchase was not discussed by a spokeswoman.
The PlayStation 5 was released in November 2020, at the same time as Microsoft’s new Xbox, which has been a competitor for two decades. Sony had sold 13.4 million PlayStation 5 consoles as of September last year, and that figure might have been greater if chip shortages hadn’t been a problem.
Sony may have a hit product with the launching of PlayStation 5. Here’s how the famous gaming system that would become the company’s crown jewel was created by the Japanese electronics titan. Mariya Pylayev/WSJ photo illustration
When it comes to business, though, content reigns supreme—especially if it is exclusive—and here is where the Sony-Microsoft spat is certain to escalate. Activision’s Call of Duty series, which has sold 400 million games since 2003, features several entries among the top ten best-selling PlayStation games. Because of its popularity, gamers and investors are concerned that if Microsoft’s merger goes through, they would lose access to Activision titles.
Sony stated on Thursday that it expects Microsoft to make Activision games accessible on non-Microsoft systems. After a few hours, Microsoft’s videogame boss, Phil Spencer, tweeted that he had voiced “our wish to retain Call of Duty on PlayStation” to Sony executives.
According to analysts, Microsoft may allow PlayStation customers to purchase Activision titles while restricting other distribution.
“I can envisage a situation where games like Call of Duty are launched cross-platform but exclusively accessible via Microsoft’s cloud and subscription services,” ABI Research analyst Michael Inouye said.
Microsoft said that Game Pass had 25 million users, up from 18 million a year ago, while Sony’s PlayStation Plus had more than 47 million end of September last year.
Analysts believe Sony, which has made minor purchases and investments in software firms in recent years, may go after a large game publisher to offset Microsoft’s move.
Microsoft’s Azure cloud-computing service is one of its weapons. When numerous gamers online battle it out with virtual swords, sophisticated computers analyze the data in the background. Microsoft can adapt the cloud to fit its own gaming thanks to Azure.
Sony has indicated interest in using Azure, and the two businesses started negotiations in May of this year, but little progress has been revealed. The conversations are still ongoing, according to Sony, and Microsoft has refused to comment. Employees from Sony’s gaming division have said that they depend on Amazon.com Inc.’s Amazon Web Services.
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In China, Sony and Microsoft lag Tencent Holdings Ltd., the world’s biggest gaming firm by revenue and a cloud operator. Tencent is the company behind the cloud computing that powers games like its own smash hit “Honor of Kings,” which is played on cellphones rather than specialized gaming machines.
The cloud isn’t as important to Sony yet. According to market analyst Lisa Cosmas Hanson of Niko Partners, over 60% of users to Sony’s gaming service still download game software onto their consoles rather than streaming it through the cloud.
Simultaneously, Sony is outpacing Microsoft and others on a piece of gear that might be crucial to next-generation videogames: virtual-reality headsets. The headsets are also essential to Meta Platforms Inc.’s Facebook’s metaverse idea, an area where Sony’s technology might offer it an advantage, though it hasn’t yet detailed a plan.
According to experts, Sony’s PlayStation VR headset has sold six million copies since its launch in 2016, and the company aims to release an upgraded version shortly. Microsoft has chosen to offer devices manufactured by other firms, such as HP Inc.
“By investigating new technology that enables new entertainment experiences, we will lead the way.” In Las Vegas last month, PlayStation business head Jim Ryan said, “Virtual reality is key to that idea.”
Yang Jie may be reached at [email protected]
The Blizzard Agreement Between Microsoft and Activision
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