Only one week after Jim Ryan publicly stated that Microsoft’s Call of Duty promise was inadequate on many levels, Sony would continue their “Inadequacy” tour on Thursday with another statement to GamesIndustry.biz.
“By giving Microsoft control of Activision games like Call of Duty, this deal would have major negative implications for gamers and the future of the gaming industry. We want to guarantee PlayStation gamers continue to have the highest quality gaming experience, and we appreciate the CMA’s focus on protecting gamers.”
What a load of absolute…
It’s not surprising that Sony would contest the ABK (Activision Blizzard King) acquisition which will be largest purchase in gaming history by their nearest competitor. This deal poses significant ramifications to Sony’s bottom line in the years to come. It is business after all, and despite the public handshakes and photo ops between Phil Spencer and Jim Ryan, they have obligations to do what’s best for each of their company’s shareholders. What’s best for Jim is to delay and potentially get a concession or two in writing. What is unusual about this public strategy that started with Jim Ryan’s statement last week is that they’re taking the battle to the court of public opinion. Generally, the discourse between companies involved in these transactions happens out of the public eye. Upon review, both the strategy and the argument being made are puzzling at best.
Who’s Being Protected?
It’s no secret that PlayStation’s success and initial market dominance were due to 3rd party exclusivity deals. In the sixth generation of consoles, Sony’s PlayStation 2 sold 155 million units, nearly three times the total combined sales of their three competitors, Microsoft’s Xbox, Nintendo’s Game Cube and Sega’s Dreamcast. They accomplished this despite the fact the PlayStation 2 wasn’t the cheapest nor the most powerful, but as a result of locking down what many consider the greatest lineup of 3rd party exclusives in a generation. While Sony wasn’t the originator of the exclusive partnership strategy, Xbox gamers see themselves waiting on the short end of the deal once again. For example Deathloop will release next week following a 1-year timed deal. Xbox gamers also continue to wonder whether they’ll see one of the industries most popular IP’s, Final Fantasy, at all this generation. These examples are only the tip of the iceberg. The hypocrisy of “protecting gamers” from potential exclusives sounds absurd coming from a company that perfected the tactic.
In Sony’s statement to Brazilian regulators, they said the following:
“No other developer can devote the same level of resources and expertise to game development. Even if they could, Call of Duty is heavily entrenched, so that no rival – no matter how relevant – can overtake it. Call of Duty has been the top-selling game for nearly every year over the past decade, and for its genre, it’s overwhelmingly the best-selling game. It is synonymous with first-person shooters and essentially defines that category.”
The problem with this argument is threefold:
- Two of the other four largest gaming platforms, Nintendo and Valve, do not sell Call of Duty
- New IP’s have captured the zeitgeist, mindshare, and engagement throughout the generation. EA’s Apex significantly bypassed its more established Battlefield franchise as a new IP. Epic’s Fortnite has competed and often beat Call of Duty in terms of engagement over the past few years.
- The only difference between Call of Duty and other exclusives is scale. The number of users impacted. To factor that means creating a precedent that will give market leaders invulnerability because the bigger you are, the larger the user base that will feel the effects.
The irony is if the scale was used to justify concessions, it would create a precedent to protect Microsoft in the next paradigm. What if Microsoft eventually reaches 100 million Game Pass subscriptions next generation however Amazon, Apple or Tencent want to play? Then one of them either buys EA or negotiates an exclusive agreement where EA Play can’t be on Game Pass. Can Microsoft turn around and say this negatively impacts 20 million of their Game Pass subscribers who use EA Play and therefore it needs to keep the service in the name of protecting their gamers? Precedents can have long-term and sometimes unintended consequences.
“Zero Business Sense”
It makes zero business sense for Microsoft to remove Call of Duty from PlayStation given its market leading console position.”Microsoft Spokesperson
In further analysis, Call of Duty remaining on PlayStation returns Microsoft both financial and strategic benefits this generation. By staying, the Call of Duty brand has the opportunity to continue growing while it would almost assuredly take a step back in mindshare if it left the PlayStation ecosystem soon. Call of Duty presents unique strategic opportunities as a cross-platform 1st party game that likely no other game in their portfolio could achieve. For example:
- A stronger brand only increases its marketing impact when aligned with Game Pass. Currently, Xbox has no presence in many markets where Call of Duty is popular. By keeping these players engaged, Microsoft will give themselves a better chance to sell Game Pass subscriptions “beyond consoles” through streaming in future years.
- Call of Duty serves as a trojan horse within the PlayStation ecosystem. Call of Duty is a social game and with cross-play and with the potential for Discord to unite friends across platforms soon, it can create a pipeline where gamers promote the value of Game Pass across ecosystems.
- Leaving Call of Duty on PlayStation prevents a vacuum. If the IP left the ecosystem, it would create an opportunity for other developers to fill that void which would hurt Call of Duty’s impact moving towards the next generation and next gaming paradigm.
- Call of Duty multi-year deals provides Microsoft with bargaining leverage which could pressure Sony to remove cross-play fees while ensuring barriers between gamers in different ecosystems are minimal.
Pay Phones, Dial-Up…and Console Wars
As the ABK deal moves into the second phase of investigations, experts aren’t surprised. This wasn’t supposed to be a quick process. There are very few things that people on opposing sides of politics agree on these days. They don’t agree on science or even what type of weather they’re looking at. One thing that does unite them is governments need to do more to regulate Big Tech. Generally, their focus has been on emerging markets…and gaming has a couple of those. Cloud gaming and game subscriptions. Ultimately, I believe that’s what Microsoft bought ABK for. Call of Duty, as well as the many other IP’s that come with this acquisition, were intended to help Microsoft become established on mobile and PC while also providing them with subscription and streaming exclusives for the future. As consoles are projected to become a smaller piece of the gaming pie moving forward, it’s hard to imagine that they would be the final regulatory battleground…or Sony’s best shot to gain something better for themselves especially when Microsoft is all but assuring console support through this generation. It brings us full circle to the initial question.
What’s the Point Jim?
Jim Ryan and Sony are making a public case for intervention based on console users who by the math of the extended deal, appear to be secure through this generation. Maybe he’s referring to an imaginary user base of PS6 gamers who are likely over 5 years away from having the opportunity to pre-order. Publicly, it looks like he’s asking the regulators to protect Sony because….that’s good for gamers? If 100% of the Call of Duty PlayStation gamers changed platforms immediately, Sony still has the biggest player base when adding up gamers who currently are in a transition phase between generations. We can’t connect the dots on a potential console monopoly with this move even if consoles were the end game.
It’s possible, maybe even likely, that Sony is arguing behind the scenes something else. Either way, it would make this public charade all the more puzzling. It’s highly unlikely that Phil Spencer or other Microsoft Gaming leadership gets on stage and begins to create anxiety about Call of Duty support to PlayStation once the deal is closed because it would undermine their strategy. However, Jim did. His message to PlayStation gamers is if this deal goes through, it will have “major negative implications” for you. Then there’s the indirect collateral damage of telling his PlayStation studios, multiple of whom are working on Games as a Service projects, “we don’t believe you can become the next big thing” even though Fortnite and Apex exist.
Even “if” Call of Duty were to leave the PlayStation console someday, market disruption creates opportunities for new winners. Sony has come off a generation where they’ve built up incredible equity with a loyal base of customers, they have incredible talent, more money than most publishers, and a world-class marketing arm. The opportunity to build a viral zeitgeist and reach more gamers has never been higher. Fighting behind the scenes should be expected. However, this public display erodes the swagger Sony once commanded and hands that air of strength to Microsoft. Some Xbox gamers in the community were angry at Jim Ryan’s “for the gamers” hypocrisy as it pertained to the exclusive ownership of IPs. I find myself instead scratching my head. Is Jim Ryan the marketing and messaging guy that Microsoft Gaming has been looking for?