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Sony’s market value drops $20 billion in a day after Microsoft gaming deal - report

By Christian Imperio Published Jan 20, 2022 12:43 pm

Sony’s market shares reportedly plummeted on Wednesday following Microsoft’s announcement that it plans to acquire Activision Blizzard for a whopping $68.7 billion.

As reported by Bloomberg, shares of Sony, the company behind PlayStation, fell 13 percent in Tokyo yesterday, wiping $20 billion off Sony’s valuation in a day, adding that it’s the company’s biggest drop since Oct. 2008.

This came on the heels of Microsoft's gaming deal with Activision Blizzard, the publisher behind popular gaming franchises like Warcraft, Diablo, Overwatch, Call of Duty, and Starcraft.

“Sony will have a monumental challenge on its hands to stand on its own in this war of attrition,” Amir Anvarzadeh of Asymmetric Advisors told Bloomberg. “With Call of Duty now most likely to be added exclusively to the Game Pass roster, the headwinds for Sony are only going to get tougher.”

Bloomberg also reported that unlike Sony, game companies with strong content and IP portfolios like Capcom Co. and Square Enix Holdings Co. both saw an increase in valuation in the wake of Microsoft’s gaming deal.

Although Sony has “maintained a consistent lead in sales and exclusive games over Microsoft’s competing offerings across several PlayStation and Xbox generations,” it said that the Japanese tech company “will be under pressure to respond” to its competitor’s “determination to spend freely to close that gap”

“Sony will struggle to match Microsoft in terms of money it can spend to buy popular game IP,” Morningstar Research analyst Kazunori Ito told Bloomberg. “Falling shares illustrate investors are worried that Sony may not be able to keep winning if indeed the industry shifts away from the hardware-based model.”

Microsoft Gaming CEO Phil Spencer confirmed yesterday that the company has agreed to acquire the embattled Santa Monica-based company.

Spencer said the inclusion of Activision Blizzard’s “fantastic franchises” to its growing lineup will “accelerate our plans for Cloud Gaming, allowing more people in more places around the world to participate in the Xbox community using phones, tablets, laptops and other devices you already own.”

Microsoft didn’t mention a specific date for the completion of the acquisition. However, Activision Blizzard CEO Bobby Kotick, in an email to employees, said that that the deal between the two companies is expected to close next year.

“Transactions like these can take a long time to complete,” Kotick said. “Until we receive all the necessary regulatory approvals and other customary closing conditions are satisfied, which we expect to be sometime in Microsoft’s fiscal 2023 year ending June 30, 2023, we will continue to operate completely autonomously. I will continue as our CEO with the same passion and enthusiasm I had when I began this amazing journey in 1991.”

The deal includes the acquisition of iconic franchises, which means that the games owned by Activision Blizzard may soon likely join Microsoft’s Xbox Game Pass, which currently has over 25 million subscribers around the world.

In March 2021, Microsoft also acquired Zenimax Media, the parent company of Fallout and Doom maker Bethesda Softworks.

The completion of the $7.5-billion deal has brought a number of development studios under Microsoft’s stewardship including the Dishonored and Prey creator Arkane Studios, Wolfenstein maker MachineGames, Quake developer id Software as well as ZeniMax Online Studios, Tango Gameworks, Alpha Dog, and Roundhouse Studios.