Sony opposes Microsoft’s Activision acquisition, says it could sabotage Call of Duty on PlayStation

Microsoft’s $68.7 billion acquisition of game developer Activision Blizzard has been in the news for quite some time. The UK’s Competition and Markets Authority (CMA) has opposed the deal since the beginning by contending that the deal could stifle competition and hurt gamers who couldn’t afford more afford to buy more expensive gaming consoles. Microsoft, on its part, has tried to placate CMA’s concerns by signing 10-years-long binding agreement with Nintendo and Nvidia for bringing Activision’s gaming catalogue to Nintendo Switch and Nvidia’s GeForce NOW in exchange for their support over its Activision acquisition deal. However, one company that has vehemently opposed the deal is Sony.

Now, in a more detailed letter to the CMA, Sony has detailed a host of reasons why Microsoft’s acquisition of Activision could be harmful for the competition.

What is Sony saying

Sony, in its letter to the CMA, has said that if the deal goes through, Microsoft, could intentionally or unintentionally, degrade the quality and performance of Call of Duty on PlayStation compared to Xbox. The company has also contended that post the deal, Microsoft could release PlayStation version of Call of Duty (CoD) where bugs and errors emerge only on the game’s final level or after later updates. Even if these bugs are resolved, it would take time by which gamers would have lost faith in PlayStation for offering a quality CoD experience.

Here are snippets of Sony’s letter to the CMA

a) As the PFs recognise, Microsoft could deploy multiple strategies to fully or partially foreclosure access to Activision content. In relation to Call of Duty, SIE has also explained that, in addition to withholding access to existing or future Call of Duty titles, Microsoft could adopt one or several partial foreclosure strategies to impair PlayStation’s competitiveness. These strategies could include:

– raising the price of Call of Duty on PlayStation;

– degrading the quality and performance of Call of Duty on PlayStation compared to Xbox;

– degrading Call of Duty to ignore PlayStation-specific features (eg: better controller haptics) or not prioritsing investment in such features;

– restricting, degrading, or not prioritising investment in the multiplayer experience on PlayStation; or

– making Call of Duty available on MGS only on Game Pass.

b) Today, Activision is incentivised to reach an agreement with SIE to distribute Call of Duty. Post-Transaction, the merged entity would benefit from a failure to distribute Call of Duty on PlayStation. This dramatically improves the merged entity’s bargaining position and would allow Microsoft to obtain a higher revenue share for its content than would be achieved on the merits with an independent Activision.

c) Post-Transaction, Microsoft will need to make choices about the support it will provide to develop any PlayStation version of Call of Duty. Even if Microsoft operated in good faith, it would be incentivised to support and prioritise development of the Xbox version of the game, such as by using its best engineers and more of its resources. There would be no practical way for the CMA (or SIE) to monitor how Microsoft chooses to allocate its resources and the quality/quantity of engineers it devotes to the PlayStation version of Call of Duty, to ensure that SIE would be treated fairly and equally.

Microsoft might release a PlayStation version of Call of Duty where bugs and errors emerge only on the game’s final level or after later updates. Even if such degradations could be swiftly detected, any remedy would likely come too late, by which time the gaming community would have lost confidence in PlayStation as a go-to venue to play Call of Duty. Indeed, as Modern Warfare II attests, Call of Duty is most often purchased in just the first few weeks of release. If it became known that the game’s performance on PlayStation was worse than on Xbox, Call of Duty gamers could decide to switch to Xbox, for fear of playing their favourite game at a second-class or less competitive venue.

What is Microsoft saying

Microsoft, on the other hand, has confirmed that it has no intention of making Call of Duty exclusive to the Xbox platform or time CoD updates to favour CoD The company has said that once the deal is complete, it aims to continue offering CoD on PlayStation while expanding its availability to other gaming platforms, namely, Nintendo Switch and Nvidia GeForce Now.

“Inclusion of Activision content in Game Pass will spur Sony to invest in its subscription offering: By enabling Microsoft to compete more effectively against Sony, the Merger can also be expected to push Sony to improve its subscription offering, to the benefit of its more than 46 million subscribers, which would in turn result in lower prices, higher quality and/or greater choice for console customers,” the company wrote.

“The Merger will also result in benefits to customers in mobile game distribution in the form of lower prices, higher quality greater choice and greater innovation. This includes both end consumers and developers of native mobile games each of which are relevant customers of mobile app stores,” the company added.

Furthermore, the company also said that it has offered the same deal to Sony as it did to Nvidia and Nintendo. Here are details of the deal:

Microsoft’s offer to Sony

To resolve the Console Gaming SLC, Microsoft will commit to continue licensing CoD to Sony – including all existing and future releases on the Xbox console – for a period of 10 years. The key elements of the proposed licensing remedy are set out below:

– Scope: The remedy will apply to CoD titles for consoles and associated content (“CoD Games”). CoD Games includes all past and current CoD titles available on PlayStation. In addition, all future CoD titles available on the Xbox console will also be available on PlayStation.

– Term: The remedy will apply for a period of 10 years.

– Console platforms: The remedy will apply to all Sony consoles (including PlayStation 4, PlayStation 4 Pro and PlayStation 5) and any successor consoles.

– Parity: The remedy will provide Sony with parity on release date, content, features, upgrades, quality and playability with the Xbox platform. Microsoft is prepared to commit to have an Objective Third Party Assessor.

– Economic terms: All purchases will be subject to a revenue sharing arrangement, with Sony retaining []% of the revenue from sales of CoD Games, and content related to any CoD Games.

– Wholesale pricing parity: The remedy will provide that the wholesale price of CoD Games offered to Sony (“Wholesale Price”) is for the equivalent version of the game on the Xbox platform.

– Subscription and streaming rights: Any CoD Game in a Microsoft multi-game subscription is eligible for inclusion in Sony’s multi-game subscription service, at the same time and for the same duration.

CMA is set to give its verdict on the deal on April 26, which is when we will know if Microsoft will be allowed to go through with the deal or not.

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