Microsoft's US$68.7 billion bid to acquire video game developer Activision Blizzard could challenge the role of its rival Sony in the gaming industry, as the Japanese tech giant saw its share slide more than 12% in Tokyo on the day the blockbuster deal was announced.
The transaction, which could take more than a year to close, would see Microsoft become the world's third-largest gaming company in revenue, behind Tencent and Sony. Industry observers believe that Activision's popular gaming series including "Call of Duty" and "World of Warcraft" and its 400 million monthly active users were the major attractions to the deal.
While some market analysts have pointed out that Microsoft's purchase price was a 45% premium over Activision's closing price on January 14, Microsoft CEO Satya Nadella has stressed that gaming is the most dynamic category in entertainment across all current platforms and that it will play a key role in the development of the metaverse.
The deal, if approved by regulators, would mark the highest price ever paid by a US tech company in an acquisition. The biggest previous deal made by Microsoft came in 2017 when it purchased LinkedIn for US$26 billion, followed by its planned $19.7 billion acquisition of speech recognition company Nuance.
Although the Microsoft-Activision tie-up is expected to pose a threat for Sony, it could face a high level of scrutiny from regulators, according to the Wall Street Journal. Even if the deal is completed, Microsoft will likely still make some Activision games for PlayStation consoles.
While sharing a competitive relationship, Microsoft and Sony have also engaged in collaboration from time to time.
The two companies entered a strategic partnership in May 2019, which resulted in Sony using Microsoft Azure data centers for cloud gaming and content streaming services. They teamed up again in May 2020 to offer AI camera-driven solutions to their enterprise customers in computer vision and video analytics.
Market analysts have been quoted by Reuters as saying that Microsoft may place its focus on metaverse development instead of domination in the console wars. A Nikkei report also suggested that Microsoft's acquisition of Activision will give it a clear lead in metaverse development because it could use Activision to create immersive virtual worlds for work and play.
Sony, on the other hand, holds fewer advantages in metaverse development. Despite the launch of its next-generation virtual reality (VR) headset at CES 2022, the company has yet to come up with clear strategies on how to approach the metaverse market.
