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Official letter: Sony cannot compete with Xbox

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In a letter to the judicial authorities, Sony expressed its concerns regarding the purchase of Activision by Xbox. And added that Sony will not be able to compete with Xbox! with us in IT provider be with

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At the beginning of 2022, Xbox announced the biggest purchase of the gaming industry. Microsoft had reached an agreement with Activision Blizzard and was supposed to buy this company along with all studios and IPs for $68.7 billion. To give you an idea of ​​how big this number is, let’s look at the closest major acquisition in history: Take Two bought Zynga for $12.7 billion. That is, Xbox was able to set the record for the most expensive purchase with a distance of 5 times.

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Activision Blizzard is the owner of one of the biggest IPs in this industry and is considered one of the giants of the game industry with its very high revenues. IPs such as Call of Duty, Overwatch, Diablo and Warcraft are among the games of this publisher. Activision Blizzard had nearly 10,000 employees in 2021. To understand this number better, we should say that Xbox alone had less than 10,000 employees before buying Activision. This means that with this purchase, Xbox studios and employees will be doubled! For more information, you can read the introduction article of Xbox Studio 33.

Also, the Call of Duty series was able to sell 425 million copies by 2021. For comparison, God of War 2018, which is one of Sony’s biggest games, managed to sell 20 million copies.

With the numbers and figures mentioned above, you can understand the magnitude of this purchase to some extent. When a large purchase of this magnitude takes place, several different legal processes must be followed. For example, several judicial authorities from all over the world will review the details of this contract, whose final approval is required for its registration. These authorities decide whether this purchase has a big impact on the industry by examining different angles. Does it eliminate competition and create monopoly? Does it harm users’ right to choose or not?

These questions need to be answered by Xbox to allay any concerns, for example, Xbox has promised to address these concerns that the Call of Duty series will not be exclusive and will only be added to Gameplay on release day. These processes are so long that since the announcement of this purchase, the legal processes have not been completed and we are still a few months away from their completion.

Some authorities publicly announce that if a company has objections or concerns about this purchase, it should be announced in a letter so that it can be addressed. One of the companies that wrote a letter was Sony. According to the introduction that was said, Sony’s concerns are completely understandable. Also, on the day when the news of Activision’s purchase was published, Sony’s stock fell by 13%, and since then, this amount has reached about 30%.

In his letter, Sony objected to two important issues, which we will discuss below:

Sony cannot afford to lose the Call of Duty series

The letter explained that making big games requires several hundred million dollars and several thousand employees, and few third-party companies like EA and Take Two have the ability to make this level of games. Sony added that even these publishers can’t make a big game to compete with Call of Duty. Sony added relying on the point that this company, like other big companies, does not have the ability to make a series to replace Call of Duty.

Sony also added that many users pay attention to many factors when buying a console. One of the most important factors is the presence of big games on that console, such as Call of Duty, GTA, FIFA and Fortnite. Therefore, if this popular series is removed from PlayStation, Sony will suffer a lot of damage in the console sales department.

The last part that came up about Call of Duty was that one of the biggest sources of revenue for console makers like Sony, Microsoft and Nintendo is the sale of third party games. All three companies charge game developers a 30 percent commission for each sold copy of the games. Sony announced that Call of Duty is the company’s largest source of revenue from fees, and if it is removed, it will lose several billion dollars from its revenue. It should be noted that in the current situation, Sony has announced a 37% decrease in its income in the last quarter.

Sony does not have the ability to compete with Gameps

In this part of the letter, Sony objected to three parts of Gamepass. In the first part, Sony added that many companies incur heavy investments in the process of making games, and by selling each version, this amount is compensated with profit. But Xbox provides users with a large number of games at a very low monthly cost. Sony expressed concern that this will ultimately reduce the quality of games and harm users. Of course, Xbox has rejected this claim many times and even managed to receive the award of the best publisher of the year from the Metacritic website.

The second part of Sony’s protest in the field of games is related to its direct damage to Sony. It seems that what Sony means is that users will switch to Gameplay, which costs less, which will reduce the sales of games on PlayStation and reduce their income. Of course, Xbox has proven by publishing various numbers that Gameplay increases the sales of games despite different strategies.

In the third part, Sony says that since the release of Gamepass (2017), this service has been able to occupy 60-70% of the total market of subscription services. This amount reaches 70-80% in different countries such as Brazil. Sony claims that it does not have the ability to compete with Gamepass and does not want to do so. He says that if he decides to do this and incurs very heavy investments, he still won’t be able to reach Gamepass in the next few years.

Sony added that the addition of Activision Blizzard games to Gamepass will exacerbate these three problems.

Conclusion

From the day Xbox announced this purchase, almost everyone knew that this purchase would be completed without any problems. Because a purchase is stopped only when it becomes a complete monopoly. For example, Nvidia stopped buying ARM last year, because ARM had a large percentage of the market and by removing it, the competition in the field of motherboards would be completely eliminated.

On the other hand, the game industry is much bigger than these words to lose its competition with this kind of purchases. You should know that with this purchase and the combination of the revenue source of the two companies, Xbox will again reach the second rank of companies (behind Tencent) in terms of revenue. Also, with this purchase, Xbox will reach a total of 33 studios. This is if some publishers like Embracer Group have 124 studios. With this purchase, Xbox will not even reach the first rank among the giants of the industry, let alone eliminate the competition! The only thing that will happen is to overtake Sony and cause various damages to this company.

Sony's competition with Xbox
Income of various companies in the third quarter of 2021

There are very big giants in the game industry, each of which owns a small percentage of the industry. This makes it so that even if Xbox buys another publisher after Activision, it will not become a monopoly and not violate the monopoly law. Perhaps according to the words of the managers of Xbox and Microsoft, the purchase of more studios and publishers seems almost guaranteed.

According to these points, it is clear how strange this move is from Sony and it shows that this company is a little afraid of the future and Xbox. what is your opinion?

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Adib

Adib Zahedi is the CEO and Founder of mazhd.com. He has nearly a decade of experience in IT, including two years spent working on a Youtube Chennal. He is also an author and writes articles for mazhd.com. Has articles include tutorials and covers everything from Windows PCs to smartphone's software.

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