On January 25, it was reported that Microsoft’s plan to acquire the well-known game developer Activision Blizzard made Sony’s video game strategy more challenging. Its increased competition in cloud services and exclusive gaming software has led Sony to seek more advantages in hardware.
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Microsoft’s plan to buy Activision Blizzard for $75 billion will give it access to some of the games that are popular with gamers around the world. This makes Sony have to consider how to enrich its game software lineup and whether to continue to seek more hardware advantages. In addition, Sony needs to plan how to deal with the popular concept of the metaverse. The so-called metaverse, composed of various three-dimensional virtual worlds, is inspired by real video games.
Microsoft sees Activision Blizzard’s “Call of Duty” and “World of Warcraft” and other well-known game series as the future core of its Game Pass service. Microsoft’s cloud gaming service, Game Pass, costs $10 a month and can provide users with a variety of game content. Not only does this challenge Sony’s PlayStation Plus service, but Microsoft’s emphasis on software content further differentiates it from Sony’s gaming business. For now, Sony’s main strategy remains to cram the latest high-quality games into a dedicated console like the PlayStation 5.
Sony’s stock price has risen eightfold over the past eight years, marking one of the most successful periods in the company’s 76-year history. But news of Microsoft’s acquisition of Activision Blizzard sparked investors to sell Sony’s stock, which fell nearly 13 percent on Wednesday before rebounding 5.8 percent the next day. In the current tech ecosystem, more and more companies are building direct relationships with consumers through subscription services such as Netflix, Apple Music and Amazon Prime. Staying ahead of the curve requires constant adaptation to such a tech ecosystem. Sony is no exception.
Sony Pictures Entertainment, Sony’s video content unit, has adopted a business model of selling rights to parties, including streaming rights to the decades-old sitcom “Seinfeld” to streamers like Netflix Service Platform. Works by Sony Music-signed artists like Adele are also frequently featured on non-Sony platforms such as Spotify.
Sony is closer to Netflix’s business model in video games. With the help of the PlayStation Plus service, Sony sells game content directly to players. Investors also see the business as a big reason for Sony’s stock performance.
Pictured: Sony sells streaming rights to decades-old sitcom Seinfeld to Netflix
Just a decade ago, Sony was largely reliant on businesses such as televisions and portable music players, and video games accounted for just one-eighth of the company’s total revenue. Today, gaming and related cloud services are Sony’s largest business segment, accounting for nearly a third of total revenue and operating profit.
Sony Chief Executive Kenichiro Yoshida said at the CES in January that more “social entertainment spaces” would incorporate Sony’s strengths, such as virtual sets for watching football games or allowing passengers to play big video games. of electric vehicles. But a Sony spokesman declined to comment on how Sony would pursue its strategy after Microsoft’s deal with Activision Blizzard.
Sony’s PlayStation 5 console hit stores in November 2020, at about the same time as Microsoft’s latest Xbox console. Sony had sold 13.4 million PlayStation 5s as of September last year, a number that would have been even higher had it not been for a worldwide shortage of chips.
But when it comes to profit, content is king, and even more so with exclusive content. That’s an area where Sony and Microsoft’s competition could intensify. Activision Blizzard’s “Call of Duty” franchise has sold more than 400 million copies since 2003 and has consistently ranked in the top ten on Sony’s PlayStation top-grossing game list. The situation has also sparked concerns among players and investors that Microsoft could pull Activision Blizzard games off other gaming platforms such as the PlayStation if the deal with Activision Blizzard goes through.
Sony said Thursday that it expects Microsoft to ensure that Activision Blizzard games will work on non-Microsoft platforms. Hours later, Microsoft’s head of video games, Phil Spencer, said on Twitter that he had expressed to Sony executives that “we want to keep Call of Duty on PlayStation.”
Analysts said Microsoft could make PlayStation users pay for Activision Blizzard games out of their own pockets, while restricting distribution channels.
Michael Inouye of market research firm ABI Research said: “We could see games like Call of Duty potentially being distributed across platforms, but only through Microsoft’s cloud computing platform and game subscription service.
Microsoft said it had 25 million Game Pass subscribers, up from 18 million a year ago. As of September last year, Sony had more than 47 million PlayStation Plus subscribers.
Sony has made a series of small acquisitions and investments in software companies in recent years. Analysts have speculated that Sony may acquire a major game publisher in order to compete with Microsoft in content.
Microsoft also has a powerful weapon in its hands, the Azure cloud computing service. When multiple players compete online, Microsoft’s powerful cloud computing technology processes massive amounts of data behind the scenes. Azure means Microsoft can also customize related cloud services for its own video games.
Sony has expressed interest in using Microsoft’s Azure cloud computing service, and the two companies started talks in May 2019, but have yet to announce any progress. Sony said talks were continuing, but Microsoft declined to comment. Sony Gaming employees say they are currently using AWS, Amazon’s cloud computing service.
In the Chinese market, both Sony and Microsoft lag behind Tencent. The latter is both a cloud computing service operator and the world‘s highest-grossing gaming company. The cloud computing service operated by Tencent powers the popular game “Honor of Kings”. Players typically play Honor of Kings on smartphones rather than dedicated consoles.
For Sony, cloud gaming services are not yet core. About 60 percent of Sony game users still download game software to their consoles rather than play directly through cloud services, said Lisa Cosmas Hanson, founder of market research firm Niko Partners.
Fortunately, Sony is ahead of Microsoft in the field of virtual reality devices. Virtual reality devices could be an area of hardware critical to the next generation of video games and are at the heart of the metaverse concept popularized by Facebook parent company Meta. While Sony has yet to formulate a specific strategy for the metaverse concept, the company’s technology may bring more advantages in this area.
According to analysts, Sony has sold 6 million PlayStation VR virtual reality devices since launching in 2016, and plans to launch an updated version soon. Microsoft has opted to sell virtual reality devices from other companies such as Hewlett-Packard.
“We’re going to lead the way, exploring new technologies and unlocking new entertainment experiences. Virtual reality is at the heart of that philosophy,” Jim Ryan, head of PlayStation business, said at this year’s CES. (Chen Chen)