With Activision Blizzard deal, Microsoft’s Game Pass is now a huge problem for Sony

In this article:

Microsoft (MSFT) is sitting pretty as a reborn gaming juggernaut thanks to its pending $68.7 billion acquisition of Activision Blizzard (ATVI). The deal, announced Tuesday, gives Microsoft access to Activision Blizzard’s slew of franchises including “Call of Duty: Black Ops - Cold War” and “Call of Duty: Vanguard” two best selling games of 2021, according to NPD Group.

The announcement is a huge blow to Microsoft rival Sony (SONY), maker of the PlayStation, as it means the company could eventually lose access to Activision Blizzard’s properties. “Call of Duty,” for example, has been one of the most played titles for the PlayStation in the past few years.

The deal and its consequences sent shares of Sony plummeting 12% from $124.79 at the close of markets on Friday to $110.02 at the close on Wednesday. The stock recovered slightly on Thursday, rising to $115.24 by midday.

LOS ANGELES, CA - JUNE 10:  Ashley Speicher, Xbox Game Pass exec, speaks during the Microsoft xBox E3 briefing at the Microsoft Theater on June 10, 2018 in Los Angeles, California. The E3 Game Conference begins on Tuesday June 12.  (Photo by Christian Petersen/Getty Images)
Game Pass makes Microsoft a gaming juggernaut. (Photo by Christian Petersen/Getty Images) (Christian Petersen via Getty Images)

But losing access to Activision Blizzard’s franchises isn’t the only thing Sony has to worry about. More troubling for the company is Microsoft’s up-and-coming Game Pass streaming service, which could serve as the future of gaming for players around the world.

Game Pass Ultimate is a cloud powerhouse

Microsoft’s Game Pass comes in three tiers. The first two start at $9.99 per month, and give players the option to download and play more than 100 games, including new releases, on their Xbox or PC.

The third tier, Game Pass Ultimate, is a potential goldmine for Microsoft. Starting at $14.99 per month, the service lets you play games on your Xbox or PC and, more importantly, allows you to stream games via the cloud to your smartphone, tablet, TV, PC, Mac, or Chromebook. It’s more or less a Netflix for gaming.

The prospect of cloud gaming has been a dream for years. The idea is to let gamers play where they want, when they want, any device they want without the need for pricey consoles or PCs.

Sony currently offers its own subscription services including PlayStation Plus, which allows you to play PlayStation games via the company’s PlayStation 4 and PlayStation 5 consoles, as well as PlayStation Now, which lets you download and stream games to your console or PC, but not your mobile devices.

According to Bloomberg, Sony is working on a new cloud platform called Spartacus that will launch later this spring, and combine the benefits of PlayStation Now and PlayStation Plus, though there’s no word on pricing.

Microsoft, however, also owns its own world-class cloud service in the form of Azure, which allows the company to better power its cloud gaming service.

Microsoft’s new catalog could box out Sony’s cloud dreams

The problem for Sony, however, is that Microsoft has already established its cloud gaming service. And unlike those from the likes of Google (GOOG, GOOGL), Amazon (AMZN), or Nvidia (NVDA), it has plenty of name recognition among gamers.

Perhaps more worrisome for Sony, though, is the fact that Microsoft’s service, if the Activision Blizzard transaction goes through, will have access to some of the biggest properties in gaming. Don’t forget, Microsoft also closed its $7.5 billion acquisition of Zenimax just last year, giving it franchises like “The Elder Scrolls,” “Doom,” “Fallout,” “Wolfenstein,” and a host of others.

Microsoft has already announced that Zenimax subsidiary Bethesda’s hotly-anticipated “Starfield” will be an Xbox and PC exclusive, meaning it won’t show up on any of Sony’s services or consoles, and there’s no telling what the company will do with its Activision Blizzard franchises when the transaction is finalized.

Microsoft has to make back that $68.7 billion, after all. So it would make sense for the company to cut off Sony from its titles when any agreements the PlayStation maker made with Activision Blizzard lapse.

That will give Game Pass a huge boost over Sony’s future service. What’s more, Microsoft already has agreements in place that allow Game Pass users to get access to EA’s and Ubisoft’s games, not to mention Take-Two Interactive’s titles including “Grand Theft Auto.”

Sony has been the gaming king for years by outselling Microsoft’s consoles. Sony, for instance, sold 116.4 million PlayStation 4s, while Microsoft sold 50.4 Xbox One consoles. The PlayStation 3, also outsold the Xbox 360, 87.4 million to 85.8 million.

Both the PlayStation 5 and Xbox Series consoles are still in short supply, so it’s hard to tell which will come out on top, but the future of gaming is moving more and more toward the cloud, and if Sony doesn’t catch up to Microsoft, the company’s fortunes in the gaming industry could soon flip.

Sign up for Yahoo Finance Tech newsletter

More from Dan

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit

Got a tip? Email Daniel Howley at [email protected] over via encrypted mail at [email protected], and follow him on Twitter at @DanielHowley.

Advertisement