' Sony and Microsoft: An Arms race for Domination of the Video Game Industry and its Relevant Antitrust Concerns | MTLR

Sony and Microsoft: An Arms race for Domination of the Video Game Industry and its Relevant Antitrust Concerns

It’s no secret that both Sony and Microsoft have been rivals in the video game industry for decades. This arms race between the two competitors has resulted in independent gaming studios releasing timed exclusive content on either Playstation or Xbox consoles. However, over the last decade, this competition has evolved. Instead of lobbying for platform-exclusive games, both Sony and Microsoft have made the leap to acquiring independent game studios they believe have promising new and legacy IPs. Microsoft’s latest acquisition of Activision for $68.7 billion brings global titles like “Warcraft,” “Diablo,” “Overwatch,” and “Call of Duty” to their side of the gaming isle. On the heels of this acquisition, Sony announced its own acquisition of Bungie Studios. However, these two deals are just the latest in a long list of acquisitions for both gaming giants. Sony has developed or acquired numerous studios over the past decade including Bluepoint, Insomniac Games, Naughty Dog, Santa Monica, and Sucker Punch studios just to name a few. Likewise, Microsoft now boasts big name studios like 343 Industries, Ninja Theory, Obsidian Entertainment, and Bethesda entertainment.
These recent moves by both Sony and Microsoft are an indication that both companies see the future of their respective platforms to be determined by first-party games. Interestingly, the third gaming giant, Nintendo, has long been employing this strategy. As of the end of 2021, Nintendo’s top 10 games on the Nintendo Switch comprise of well-known series such as Mario Kart, Animal Crossing, Super Smash Bros., Zelda, and Pokemon. Without exception, every single game is either directly published by Nintendo or exclusive to the Nintendo Switch system. When comparing systems, Sony’s Playstation 5 sold 16.1 million units in its first 57 weeks on the market, the Nintendo Switch sold 15.8 million units, and Microsoft’s Xbox Series X sold 10.6 million units. While a console’s success cannot be determined by its sales figures alone, these numbers do indicate that Nintendo’s strategy of prioritizing first-party titles is a major reason for Nintendo’s success to date.
Meanwhile, the top 10 games for Playstation and Xbox include many of the same titles on both platforms. While some titles such as Ghost of Tsushima and Marvel’s Spider-Man: Miles Morales are exclusive to PlayStation, some of the titles in this list and other top selling series including behemoths like Call of Duty will now be owned by Microsoft. While Sony is by no means starved for exclusive content, repeated acquisition of gaming studios like Activision and Bungie do present an interesting legal question on whether or not the Federal Trade Commission (“FTC”) will step in and increase regulation on the gaming and entertainment industry moving forward.
The issue of entertainment monopolies goes beyond just gaming. In 2019, Disney made headlines for representing 38% of the United States box office alone. This dominant showing was partially due to Disney’s acquisition of Fox, a deal that brought a high level of scrutiny from the Department of Justice (“DOJ”) and a final judgement which required Disney to selloff a substantial portion of Fox’s assets to complete the transaction. Bloomberg has already reported that the FTC will be reviewing Microsoft’s acquisition of Activision.
Both Microsoft and Sony have likely put in safeguards to help argue that their respective acquisitions will not break antitrust laws. While Sony’s acquisition of Bungie is of a smaller magnitude than Microsoft’s Activision acquisition, it has already clarified some of its deal points – possibly in the hopes of avoiding review by the FTC or DOJ. In Sony’s acquisition of Bungie, Bungie has stated it “retains full creative independence” for its games as well as continuing to be self-published. Destiny, Bungie’s current flagship title, is set to maintain its cross-platform presence (Playstation, Microsoft, and PC). In fact, Sony’s CEO stated that the Bungie acquisition has “nothing to do with industry consolidation.” These statements may prompt one to question the purpose of the acquisition in the first place.
On the surface, it appears both Bungie and Sony are characterizing their new relationship as a partnership. Bungie has stated that this transaction “begins [their] journey to become a global multi-media entertainment company.” On Sony’s end, in its recent shareholder’s meeting, Sony’s financial director stated that its acquisition of Bungie was primarily about the “multi-using of IP and merchandising of IP – like a game title maybe put into movies.” In short, Sony will have access to the development talent at Bungie, its revenue stream (primarily composed of Destiny software sales), and access to both the Destiny IP and any future Bungie IPs for development into TV shows, movies, and other media content outside gaming.
Sony’s acquisition of Bungie appears to be the latest acquisition in a series of gaming studio acquisitions. However, based on current public information, it’s clear that Bungie views the entire transaction as more of a partnership than an acquisition. Regardless, with the FTC reviewing Microsoft’s acquisition of Activision, it’s clear that both companies will have to take strategic steps to avoid antitrust concerns from the FTC and DOJ. Perhaps Sony’s careful structuring with Bungie – including Bungie’s full creative independence – is one tool that both companies will be using to justify their future acquisitions.

* Umar Chaudhary is an Associate Editor on the Michigan Technology Law Review.

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