Sony shares slide 13% in wake of Microsoft’s $69bn Activision acquisition

Deal for Call of Duty games maker wiped $20bn from Sony’s valuation in a day

Sony shares fell 13 per cent in Tokyo on Wednesday, their biggest drop since October 2008, after PlayStation rival Microsoft announced a $69 billion (€60.8 billion) deal to acquire games publisher Activision Blizzard.

The blockbuster acquisition escalates Microsoft’s spending spree to secure intellectual property assets for its Xbox Game Pass service, wiping $20 billion (€17.6 billion) off Sony’s valuation in a day. The push to attract paying subscribers with an overwhelming portfolio of games challenges Sony’s traditional console business model that relies on high-profile exclusive titles and hardware sales. Games and network services account for about 30 per cent of Sony revenue.

Microsoft announced Tuesday that it has more than 25 million Game Pass subscribers and "will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass," spanning both existing and new titles, according to Xbox chief Phil Spencer. Call of Duty, Diablo and World of Warcraft are among several highly successful franchises developed under the Activision Blizzard umbrella.

“Sony will have a monumental challenge on its hands to stand on its own in this war of attrition,” said Amir Anvarzadeh of Asymmetric Advisors. “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.”

Exclusive games

Elsewhere across the games industry, publishers rallied in the wake of Microsoft’s announcement, with Capcom and Square Enix up by more than 3.7 per cent in Tokyo. Analysts, including Jefferies’s Atul Goyal, saw the move as raising valuations for game companies with strong content and IP portfolios.

Sony has maintained a consistent lead in sales and exclusive games over Microsoft’s competing offerings across several PlayStation and Xbox generations. Now that its rival has signalled its determination to spend freely to close that gap, Sony will be under pressure to respond.

“Sony will struggle to match Microsoft in terms of money it can spend to buy popular game IP,” Morningstar Research analyst Kazunori Ito said. “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.”

– Bloomberg