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[GI.Biz] Is Sony right to be worried about Call of Duty?

3liteDragon

Member
Xbox's Call of Duty acquisition could have a major impact on how games are paid for and distributed.
Sony is worried about Call of Duty.

Regulators around the world are looking into this monster acquisition of Activision by Microsoft, and are asking competitors about it. And Sony has made its view clear. The PlayStation firm views Call of Duty’s importance as ‘indescribable’, and that it is so entrenched “that even if a competitor had the budget to develop a similar product, it would not be able to rival it.” In other words, Call of Duty is a game that “influences user’s choice of console”. Is it slightly hyperbolic? Call of Duty is one of the world’s biggest game franchises, but it doesn’t stand alone. Games like FIFA and Fortnite are just as big, if not bigger. And there are plenty of major games markets, including Japan, where it’s a relatively small player.

As for influencing console buyers, that’s potentially true. But as a counter, the biggest games console on the market right now is Nintendo Switch, and that machine has never had a Call of Duty game on it (which Xbox feels may be a missed opportunity). A lot of the fear stems from the prospect of Microsoft, one day in the future, making the series exclusive to the Xbox platform (despite reassurances that it won’t).

The evidence for this is that after Microsoft bought Bethesda, it subsequently announced that its future games wouldn't be coming to Sony's consoles. But Bethesda isn't Call of Duty. Most of Bethesda's games are small to mid-sized in terms of commercial success. The exception are games made by the company's flagship studio: Bethesda Games Studios, which makes the Elder Scrolls and Fallout games. But BGS isn't a prolific developer. In fact, between its last major game (Fallout 4) and its next one (Starfield), there will have been ten Call of Duty games released. Call of Duty is on a completely different scale. The closest Xbox has to an IP of this size is Minecraft. Microsoft bought that game eight years ago and it remains available (and supported) on every single platform. As does Minecraft Dungeons. The next game in the Minecraft series -- Minecraft Legends – was announced in June, and it is also a multformat release. It was even showcased during Nintendo's last event.

Granted, Minecraft is a radically different proposition to Call of Duty, but there is a shared truth that if Microsoft was to take Minecraft away from Nintendo and PlayStation, the biggest loser out of that would be Minecraft. Call of Duty has a massive fanbase on PlayStation. If Xbox was to prevent that audience from playing the game, some might abandon Sony, but others will simply abandon Call of Duty. And that would give competitors, like EA's Battlefield series, a unique opportunity. But even outside of the Minecraft precedent, Call of Duty remaining on PlayStation actually benefits Xbox. Microsoft isn't as interested in the battle of the console boxes. It believes the future of games is going to be through streaming and subscriptions. Call of Duty isn't so much a reason to buy an Xbox console, but a reason to subscribe to the Game Pass subscription service.

And this is where PlayStation is right to be concerned. Because Call of Duty is the No.1 game on PS4 and PS5. Should this deal go through, Microsoft will own the most popular game on PlayStation. And what an opportunity that is. The marketing writes itself: 'Fed up of spending $70 every year on this game? Want extra in-game items and points? Then subscribe to Game Pass instead. You can even stream it on mobile.' Microsoft would be able to speak directly to PlayStation's own fanbase on its own console, putting Sony in an impossible position of either rejecting its console’s most popular game, or accepting what could amount to a huge Game Pass ad disguised as a first-person shooter.

PlayStation knows the power Call of Duty wields. It cites the deal it struck with Activision -- giving PS4 owners early access to Call of Duty DLC -- as a factor in the early success of that console. Even in a weakened state, which it is at the minute, Call of Duty remains a behemoth of a franchise, particularly in North America. And that's significant, because it's in the US where the competition between the two consoles is at its fiercest. So now it's down to regulators to decide whether one console manufacturer owning the Call of Duty IP is fair or not.
It's not just regulators asking tough questions, however, but the industry, too. Microsoft has been on a charm offensive for a while now, and is proactively trying to reassure the business that its intentions are good with all this investment. And it's working. Most developers and publishers that I've spoken to have nothing but positive things to say about Microsoft and its gaming initiatives.

But there's always a caveat. 'Xbox is bossing it right now', 'Xbox has been an amazing partner so far', 'At the moment, it's all about Xbox'... those are actual quotes from recent exchanges I've had with developers. They're all saying how great Xbox is proving to be, while acknowledging that things change. Because it might. In recent interviews, Xbox boss Phil Spencer has referred to the likes of Amazon and Google and Meta as potential competitors to Xbox, but also a risk to the games industry at large. The implication is that these giants aren't traditional games companies, and don't have the games industry's interests at heart. But that can also be true of Microsoft. Of course, the company has been in games for decades, and I've no doubt of the sincerity of Spencer, Booty, Bond and the whole Xbox team. They're games people. I've spoken to them enough to know they'll always be games people.

But is Satya Nadella, really? Are Microsoft's shareholders? We're told they are, but you’ll forgive some developers – particularly those with experience of big corporations – of being slightly sceptical. It's all 'let the talent do what they feel best' when the sun is shining, but the real test of their resolve is when the storm clouds start to form. If Microsoft is right about subscriptions and streaming (and it’s by no means a guarantee) then this decision over Call of Duty is a key moment. It's the sort-of deal that could make Microsoft, with Game Pass, xCloud (and Azure), and it's ever-growing roster of studios, one of the most influential games businesses in the world. It’ll have a key product in which to drive this change in how games are paid for and distributed.

No wonder Sony is worried.
 
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SlimySnake

Member
lol I remember being told that MS would never make COD exclusive. Well, even after all those assurances from MS execs, Sony is still worried and isnt buying their bullshit.

No one spends $70 billion on something to make it multiplatform. The entire point of this is to get the PS COD audience to pick up an Xbox instead so those 46 million PS+ users who generated billions in PS+ revenue alone become XBL users and generate billions in revenue for Microsoft. And this is before the hundreds of billions spent on the digital store on game purchases and microtransactions. MS wants that 30% cut more than they want a few million gamepass subs.
 

Chronicle

Member
"And this is where PlayStation is right to be concerned. Because Call of Duty is the No.1 game on PS4 and PS5. Should this deal go through, Microsoft will own the most popular game on PlayStation. And what an opportunity that is. The marketing writes itself: 'Fed up of spending $70 every year on this game? Want extra in-game items and points? Then subscribe to Game Pass instead. You can even stream it on mobile.' Microsoft would be able to speak directly to PlayStation's own fanbase on its own console, putting Sony in an impossible position of either rejecting its console’s most popular game, or accepting what could amount to a huge Game Pass ad disguised as a first-person shooter."

What is it with people and gamepass? Why do dudes shill like no other has shilled in history? That is some God awful drivel right there. What great games are on gamepass atm?

COD sells itself. Its NOT going to be day one on gamepass. Just like GOW is not going to be day one on Plus. Never.
 
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adamsapple

Or is it just one of Phil's balls in my throat?
COD sells itself. Its NOT going to be day one on gamepass. Just like GOW is not going to be day one on Plus. Never.

The next, or even the one after may not. But if the sale goes through, later CoD games will definitely be on game pass day 1. All first party published games are.

Also, once their however-long contractual tenure ends, MS has no obligation to even put out CoD games on other consoles. I think they will still do it, but they don't have any obligation.
 

Lasha

Member
"And this is where PlayStation is right to be concerned. Because Call of Duty is the No.1 game on PS4 and PS5. Should this deal go through, Microsoft will own the most popular game on PlayStation. And what an opportunity that is. The marketing writes itself: 'Fed up of spending $70 every year on this game? Want extra in-game items and points? Then subscribe to Game Pass instead. You can even stream it on mobile.' Microsoft would be able to speak directly to PlayStation's own fanbase on its own console, putting Sony in an impossible position of either rejecting its console’s most popular game, or accepting what could amount to a huge Game Pass ad disguised as a first-person shooter."

What is it with people and gamepass? Why do dudes shill like no other has shilled in history? That is some God awful drivel right there. What great games are on gamepass atm?

COD sells itself. Its NOT going to be day one on gamepass. Just like GOW is not going to be day one on Plus. Never.


Microsoft releases all of it's games day 1 on gamepass. What makes you think Microsoft will change it's strategy for COD?
 

Abriael_GN

RSI Employee of the Year
Obviously, they should be worried. This doesn't mean they should have a say about it.

Also lol at this absolutely silly argument.

"Microsoft would be able to speak directly to PlayStation's own fanbase on its own console, putting Sony in an impossible position of either rejecting its console’s most popular game, or accepting what could amount to a huge Game Pass ad disguised as a first-person shooter."

Microsoft can already speak directly to PlayStation's own fanbase on its own console. It's called Minecraft. That ship has sailed. Gamsindustry should really stick to sales data because their opinion pieces are comedy gold. 😂
 
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Lasha

Member
Because the game is massive. This isn't Halo which was a train wreck.

What's Microsoft's cut of a COD sale now? 20 bucks or so? Microsoft will still sell copies vita the usual storefronts and it will get players hooked on gamepass. A cod only player subscribing to gamepass now gives you two games worth of revenue per year instead of one. Players will still buy mtx which MS now gets at least 2/3 or more of. Gamepass is a no brainer for COD.
 

johnjohn

Member
"And this is where PlayStation is right to be concerned. Because Call of Duty is the No.1 game on PS4 and PS5. Should this deal go through, Microsoft will own the most popular game on PlayStation. And what an opportunity that is. The marketing writes itself: 'Fed up of spending $70 every year on this game? Want extra in-game items and points? Then subscribe to Game Pass instead. You can even stream it on mobile.' Microsoft would be able to speak directly to PlayStation's own fanbase on its own console, putting Sony in an impossible position of either rejecting its console’s most popular game, or accepting what could amount to a huge Game Pass ad disguised as a first-person shooter."

What is it with people and gamepass? Why do dudes shill like no other has shilled in history? That is some God awful drivel right there. What great games are on gamepass atm?

COD sells itself. Its NOT going to be day one on gamepass. Just like GOW is not going to be day one on Plus. Never.
CoD will absolutely launch day one on Game Pass when it's able to, and it will still sell big numbers on Xbox and PC even with Game Pass. And since Sony doesn't have Game Pass, PS users will be forced to buy the game so it will still do massive numbers on PS.

"what great games are on Game pass?" The salt lmao.
 
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ChiefDada

Member
Yes, but not nearly to the extent people are making it out to be. Sony is simply frustrated that their largest 3rd party revenue stream is now under the control of their direct competitor. Sony was never afraid of CoD becoming exclusive, they'd just rather so business with a large 3rd party publisher as opposed to a direct competitor.

lol I remember being told that MS would never make COD exclusive. Well, even after all those assurances from MS execs, Sony is still worried and isnt buying their bullshit.

No one spends $70 billion on something to make it multiplatform. The entire point of this is to get the PS COD audience to pick up an Xbox instead so those 46 million PS+ users who generated billions in PS+ revenue alone become XBL users and generate billions in revenue for Microsoft. And this is before the hundreds of billions spent on the digital store on game purchases and microtransactions. MS wants that 30% cut more than they want a few million gamepass subs.

Flawed thinking and I explained why months ago...

For their last fiscal year, Activision (not just CoD) made $3 billion in operating profit. If the deal closed tomorrow and Microsoft continued to sell CoD at premium prices to both PS and Xbox players via premium pricing (that's substantially more revenue than subscription, not less) AND Activision's other ventures performed the same, it would take over 20 years for the $70 billion deal to break-even. Now imagine excluding PS Players and transitioning to subscription revenue model.

But don't take my word for it:

https://www.videogameschronicle.com...ofitable-to-make-call-of-duty-xbox-exclusive/
 

Jennings

Member
They have the right to worry about whatever they want, but there's no point worrying about one shooter franchise when they own Bungie. Bungie hasn't made a good game since the Halo days, but now that Sony's in charge there's no excuse for Bungie to have their own head up soooo far up their own ass in future releases.

Sony will steer the ship just fine, regardless of where CoD goes.
 
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Zok310

Member
So people that really only play COD are going to have to pay $120 a year to play COD on GP or they can just give Sony $70 a year to play it on PS4 and 5.
Putting COD on GP would be a rip off to folks that only play COD.
 
Yes, but not nearly to the extent people are making it out to be. Sony is simply frustrated that their largest 3rd party revenue stream is now under the control of their direct competitor. Sony was never afraid of CoD becoming exclusive, they'd just rather so business with a large 3rd party publisher as opposed to a direct competitor.



Flawed thinking and I explained why months ago...



But don't take my word for it:

https://www.videogameschronicle.com...ofitable-to-make-call-of-duty-xbox-exclusive/
You thinking that they need to "break even" on this deal shows that you don't seem to know much about how business works.
 

Deerock71

Member
Imagine if they turned Destiny into a COD rival, it could be pretty sweet.
Nightmare fuel for Phil.
destiny GIF
 

jhjfss

Member
So people that really only play COD are going to have to pay $120 a year to play COD on GP or they can just give Sony $70 a year to play it on PS4 and 5.
Putting COD on GP would be a rip off to folks that only play COD.
You also need PS plus for online. So its 130 in total.
 

Kagey K

Member
So people that really only play COD are going to have to pay $120 a year to play COD on GP or they can just give Sony $70 a year to play it on PS4 and 5.
Putting COD on GP would be a rip off to folks that only play COD.
Why wouldn't they just be able to purchase the game on Xbox if they aren't interested in Gsmepass?
 
The real issue is not for Sony. Is for MS itself.

When the acquisition gets approved what is MS going to do:


1. Nothing:
What is going to happen with all the internal shitshow regarding work culture?.

As of late, it seems like they are having creative issues/stagnations on their franchises.


2. Adress the work culture:
That is going to create internal turmoil and power vacuums


3. clean house, restructuring the whole company:
With MS track record.....Good Luck 😆.



What I am saying is that is not going to be a smooth transition at all. There is a high chance of catastrophic failure as in: 'is not going to be a slam dunk'. As some people are expecting.
 

Justin9mm

Member
Is COD big enough for MS to keep it multiplat and reap all the revenue across all platforms? Or is COD big enough that making it exclusive will empower Xbox/Microsoft as the No.1 juggernaut platform?

That is the billion dollar question.
 

ChiefDada

Member
You thinking that they need to "break even" on this deal shows that you don't seem to know much about how business works.

But I do M&A consulting. And why are you putting break even in quotes? What do you think the financial objective of this deal is exactly? Or can you be more specific about what you disagree with?
 
It's a staple 3rd party game. Of course it will have a negative impact on sony. I alone know like 5 people that only play call of duty with PS being default platform that they go for. They would definitely lose marketshare if call of duty wasn't available on their platform anymore. Not enough to shift the balance but they would probably fall behind xbox in the US market and be weakened on Europe too.
 
So people that really only play COD are going to have to pay $120 a year to play COD on GP or they can just give Sony $70 a year to play it on PS4 and 5.
Putting COD on GP would be a rip off to folks that only play COD.
Good thing that Microsoft sells first party releases for purchase then isn't it? At 60 instead of 70 btw.

Tell me more about the bullshit you're crying about?
 
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ChiefDada

Member
Certainly not "breaking even".

Again, why are you putting break even in quotes? I didn't ask you for the reasons to not purchase assets, but the reason for it. Its ok, someone answered it for you:

Generate a higher return on investment than other available options and put non-productive cash to work.

Return is synonymous with profit. But you can't reach positive return before you break even. If I purchase a business for $10 and that business earns $1 per year, it would take ten years to break even, all dollars received afterwards would be considered profit of my investment aka positive return on assets. So yes, Microsoft would first like to break even on this investment and subsequently earn positive returns. I hope this helps you to understand.
 
lol I remember being told that MS would never make COD exclusive. Well, even after all those assurances from MS execs, Sony is still worried and isnt buying their bullshit.

No one spends $70 billion on something to make it multiplatform. The entire point of this is to get the PS COD audience to pick up an Xbox instead so those 46 million PS+ users who generated billions in PS+ revenue alone become XBL users and generate billions in revenue for Microsoft. And this is before the hundreds of billions spent on the digital store on game purchases and microtransactions. MS wants that 30% cut more than they want a few million gamepass subs.
No.
 

reksveks

Member
Return is synonymous with profit. But you can't reach positive return before you break even. If I purchase a business for $10 and that business earns $1 per year, it would take ten years to break even, all dollars received afterwards would be considered profit of my investment aka positive return on assets. So yes, Microsoft would first like to break even on this investment and subsequently earn positive returns. I hope this helps you to understand.
Except that that division still has a value that you can account for and if/when required, you can sell parts of or completely.
 
Return is synonymous with profit. But you can't reach positive return before you break even. If I purchase a business for $10 and that business earns $1 per year, it would take ten years to break even, all dollars received afterwards would be considered profit of my investment aka positive return on assets. So yes, Microsoft would first like to break even on this investment and subsequently earn positive returns. I hope this helps you to understand.
Correct me if I'm misunderstanding you, but you're making it sound like the business lost its value of 10 dollars when you bought it.

If you purchased it for 10 dollars, made one dollar a year for 3 years, dropped the value of the company to 9 dollars due to incompetence and sold, you still made 2 dollars during that 3 years, more than it'd make in a bank from a 10 dollar investment.

Obviously extremely dumbed down (like your example), but the investment doesn't need to make 70 billion before its a success, the company is still an asset

EDIT:guy above me with a bit more brevity but point remains
 
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Helghan

Member
They should be worried, but not CoD on Game Pass is a step towards PS5 being the second console in a household bought for exclusives. Sales aren't that high in such a position.
 

Lasha

Member
Again, why are you putting break even in quotes? I didn't ask you for the reasons to not purchase assets, but the reason for it. Its ok, someone answered it for you:



Return is synonymous with profit. But you can't reach positive return before you break even. If I purchase a business for $10 and that business earns $1 per year, it would take ten years to break even, all dollars received afterwards would be considered profit of my investment aka positive return on assets. So yes, Microsoft would first like to break even on this investment and subsequently earn positive returns. I hope this helps you to understand.

"Breakeven" in M&A is a term used in accretion/dilution analysis. The proposed acquisition of ATVI is accretive because ATVI is a profitable company and Microsoft is not issuing any shares. The end result should be an increase in EPS since ATVI is profitable and Microsoft is financing the deal entirely with cash.

Your analysis would make sense if Microsoft were using its cash to finance a new studio. Microsoft would have to calculate the IRR which includes a breakeven analysis to see if the investment makes sense. Breakeven is irrelevant to the ATVI acquisition. ATVI is a publicly listed and highly profitable corporation. ATVI doesn't stop being a profitable corporation when Microsoft buys it. All of the IP owned by ATVI that the market valued at tens of billions of dollars doesn't suddenly get zeroed out. Microsoft sees a return from day 1. The return will be greater than whatever Microsoft currently receives in interest from its cash in the bank.
 
Return is synonymous with profit. But you can't reach positive return before you break even. If I purchase a business for $10 and that business earns $1 per year, it would take ten years to break even, all dollars received afterwards would be considered profit of my investment aka positive return on assets. So yes, Microsoft would first like to break even on this investment and subsequently earn positive returns. I hope this helps you to understand.
Awkward Jay Z GIF by Complex
 

Robb

Gold Member
Of course they should be worried and cautious, their biggest competitor just made a $70B acquisition of another major publisher.

I think they’ll be fine even if CoD leaves at some point though.
 

ChiefDada

Member
"Breakeven" in M&A is a term used in accretion/dilution analysis. The proposed acquisition of ATVI is accretive because ATVI is a profitable company and Microsoft is not issuing any shares. The end result should be an increase in EPS since ATVI is profitable and Microsoft is financing the deal entirely with cash.

No, it's not. Accretion dilution analysis simply measures expected synergies of a hypothetical merger. In the case of Microsoft, when A/D analysis was performed, it would be an educated guess at best of how expected synergies would boost Microsoft's earnings per share. And it would be subjectively optimistic from the perspective of the potential target (Activision) who wants to be purchased and Microsoft management who want to convince shareholders that its a good deal. It has nothing to do with break-even and I'm actually confused by your mashing of unrelated concepts together.

We are talking about actual dollars here, not pro forma hypotheticals.

Correct me if I'm misunderstanding you, but you're making it sound like the business lost its value of 10 dollars when you bought it.

Absolutely not the business hasn't lost value. Barring some weird event that would cause an asset write down, Activision acquisition remains on Microsoft books at $70b purchase price.


If you purchased it for 10 dollars, made one dollar a year for 3 years, dropped the value of the company to 9 dollars due to incompetence and sold, you still made 2 dollars during that 3 years, more than it'd make in a bank from a 10 dollar investment.

Value can't be proven until somebody actually pays cash for it. In your example, if you are able to sell at $9 in yr. 3 in addition to the other cash from operations then yes, you made profit.
 

The_Mike

Member
COD sells itself. Its NOT going to be day one on gamepass. Just like GOW is not going to be day one on Plus. Never.
You act like Sony has said all their first party games will be in the platform day one, and like Microsoft never said it.

https://www.isgamers.com/news/jim-r...y-games-wont-be-added-to-ps-from-day-one-147/

https://www.polygon.com/2018/1/23/16922912/xbox-game-pass-subscriptions-game-list-console-exclusives

Sony has always said their first party games doesn't arrive day one, whereas Microsoft had said they will.

So if Microsoft lies about exclusives on day one (which they haven't yet), then cod will not come day one as the first xbox exclusive.

So, not really comparable.
 
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Lasha

Member
No, it's not. Accretion dilution analysis simply measures expected synergies of a hypothetical merger. In the case of Microsoft, when A/D analysis was performed, it would be an educated guess at best of how expected synergies would boost Microsoft's earnings per share. And it would be subjectively optimistic from the perspective of the potential target (Activision) who wants to be purchased and Microsoft management who want to convince shareholders that its a good deal. It has nothing to do with break-even and I'm actually confused by your mashing of unrelated concepts together.

We are talking about actual dollars here, not pro forma hypotheticals.



Absolutely not the business hasn't lost value. Barring some weird event that would cause an asset write down, Activision acquisition remains on Microsoft books at $70b purchase price.




Value can't be proven until somebody actually pays cash for it. In your example, if you are able to sell at $9 in yr. 3 in addition to the other cash from operations then yes, you made profit.

If you do accretion dilution analysis and the result is break even it means that you believe that there will be no impact to EPS from a deal. That is the only common use of break even when discussing acquisition. Especially a deal concerning two large publicly listed companies. I agree the concepts are unrelated which is why I am confused with your use of the term. Microsoft sees a return from day 1 since ATVI is profitable. Your explanation as to why Microsoft doesn't see any gain makes zero sense.
 

Robb

Gold Member
COD sells itself. Its NOT going to be day one on gamepass. Just like GOW is not going to be day one on Plus. Never.
This makes no sense, I would think the entire point of MS ‘shopping spree’ is to get content to GamePass. The rest is secondary.

I would be extremely surprised if CoD isn’t there day one. That’s like THE game from ActiBlizz to drive up the amount of subscribers.
 
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ZehDon

Member
Of course they should be. Putting Call of Duty on Game Pass is a full-tilt blast from an orbital death ray cannon in comparison to what Sony's offering up. AUD$125.00 for the third release of TLOU, or AUD$16 for a month of Game Pass ultimate, with the latest Call of Duty and Xbox Live included? Microsoft are challenging the core of Sony's business strategy through sheer scale.
 
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