Rory Galvin Delves Into the Dark Side of Big Acquisitions.
The past few years in the games industry have been pretty crazy: we’re well into a whole new generation of consoles, and with that comes big companies bolstering themselves up to convince a growing number of players to join their side. Before, it was all about the power of the system and the quality of the exclusives, but today is a completely different story. Instead of being spoilt for choice, our hands are becoming forced in order to play the games and franchises we hold dear.
There have been small things here and there in the past, but the first thing that effectively was “the shot heard round the world” was Microsoft announcing their purchase of the publisher Zenimax. Maybe you don’t know that name, but they own Bethesda and everything surrounding that: Fallout, Elder Scrolls, Wolfenstein, Dishonored, etc. This sent shocks through the industry, and left a lot of people asking “Can they even do that?” Yes, a company like that can. With it being valued at over two trillion dollars, Microsoft has the power to look at whatever publisher they want and give them an offer they cannot refuse. Well, almost - there are people in place to make sure monopolies don’t truly occur: this includes the United States Securities and Exchange Commission as well as the European Union Commission. They have the ability to say no, and then the whole deal goes up in flames. There was a lengthy investigation into the buyout, but both groups eventually approved of the purchase and it went ahead. For context, they spent about 7.5 billion dollars on Bethesda, and that’s almost as much as Disney paid for Star Wars and Marvel combined. That is a lot of money, more than you can really get your head around - so this next one is going to sound even crazier.
Activision is a company mired in controversy, and mostly for their counterpart Blizzard. Seemingly at the height of their scandals (including sexual harassment and discrimination in the workplace), Microsoft decided to add another notch to their belt. Despite comments from Xbox head Phil Spencer condemning them and saying that Xbox is “evaluating all aspects of [the] relationship” with Activision - exactly two months later the company announced they were buying them. So, they definitely thought about how they would deal with Activision, but not in the way anyone expected. The previous statement from Spencer can ring hollow in retrospect, knowing that they had possibly been in talks for months before the announcement and during some of the controversy. Here’s the kicker, they are spending roughly 68.7 billion dollars - easily the largest acquisition in the games industry (beating the previous place by five times) and the third largest acquisition in general in the 2020’s.
and that’s almost as much as Disney paid for Star Wars and Marvel combined
Activision Blizzard is one of the largest independent publishers and developers in gaming, owning so many lucrative franchises and studios. This includes the mobile giant King and their game Candy Crush Saga, Activision’s own Call of Duty franchise as well as Blizzard’s shooter Overwatch and genre-defining MMO World of Warcraft. These games are extremely popular and make billions, so in a way it’s not shocking, but the numbers behind it are still ridiculous. The deal has not closed yet, and it still has a decent possibility of being blocked by regulators, yet Microsoft expects it to close by June of next year.
Sony were possibly the group most shocked by Microsoft’s dealings. As their main competitor in the gaming space, PlayStation consistently outsold Xbox last generation, and it was looking like history was going to repeat itself for this one. Sony is known for their Worldwide Studios, a collection of developers owned by the company who make smash hits like Uncharted, The Last of Us and Spider-Man. These teams were not usually bought outright, but developed relationships with Sony before being acquired. Naughty Dog, Sucker Punch and Insomniac all made multiple games for the platforms before being bought. Most consumers would just assume they were owned by Sony, because they only saw their games on PlayStation. That’s what makes the group of developers feel more natural than what Microsoft is doing. Sony is worth just over 90 billion dollars today - nothing to scoff at, but also nothing close to Microsoft’s size. So, when it comes to the recent acquisitions they simply cannot compete in the same way - they can’t afford an EA or Ubisoft to match a company like Activision Blizzard. It’s kind of a cheat code for Microsoft - because no matter how much Sony tries, they won’t have the capital to compete. It’s an arms race, but one side has a much bigger gun.
However, there have been recent efforts to take up more stake in the industry on Sony’s part. Throughout 2021, Sony finally bought up some of its closest partner studios like Housemarque and Bluepoint who recently made Returnal and the remake of Demon’s Souls respectively. It’s another buyout that makes sense, and further shows PlayStation as the place to play these more passionately-made games. Something feels more corporate over at Microsoft, but at the end of the day everything is corporate - it’s just a matter of how things are presented to the public. For example, a bigger shock from Sony was their purchase of Bungie, the developer of Destiny and more famously, the original team behind Microsoft’s Halo. This feels more like a direct response to Xbox, even if it may be stated otherwise. Sony have said that they are giving a lot of freedom to Bungie (which they do with most studios under their umbrella) and intend to have their future games be multiplatform. It’s a fair assumption that they want to do that to earn their cool 3.7 billion dollar investment back, but who knows what could happen as competition only seems to grow more and more.
It’s an arms race, but one side has a much bigger gun
The real party affected by all of this are the consumers playing games. A monopoly eliminates choice and effectively forces the average gamer to bend to a company’s will in order to play what they’re interested in. Call of Duty could one day become an exclusive, and the millions of players who already own PlayStations would be completely out of luck. If you’re on Xbox, you might be happy with all this news - especially with most of these future releases coming to Microsoft’s Game Pass service. It truly is a great deal at the moment, but believe you and me the price will increase as the number of subscribers grows. For example, in Ireland, Netflix launched at €7 a month in 2012, and now the “Standard” plan is more than double at €15. Everyone, including Microsoft, is chasing that model. And as more games from big publishers get added to the service, those buyouts will have to earn their money back through the consumer.
So, you will have less choice on both platforms and get funnelled into subscription services that are technically a good deal - but will end up biting you as you become reliant on them and the price inevitably increases. That is the industry we live in today, and consumers should not celebrate these massive acquisitions without knowing the long term consequences, whether that’s from Sony, Microsoft or anyone else. Oh, and if you’re on PC, you’re laughing your way to the bank (to get a small loan for a new graphics card).