Sony Entertainment head met with EC in early September on Microsoft’s Activision acquisition – sources

Breaking News 30 September

Sony Entertainment head met with EC in early September on Microsoft’s Activision acquisition – sources

Sony Interactive Entertainment (SIE) head Jim Ryan was in Brussels in early September to meet with the European Commission (EC) on Microsoft’s [NASDAQ:MSFT] proposed acquisition of Activision Blizzard [NASDAQ:ATVI], according to two sources familiar with the matter.  

The deal was today (30 September) formally notified to the EC following lengthy prenotification talks. The EC has set a deadline of 8 November for its Phase I review of the transaction. 

The USD 68.7bn deal is also under a Phase II review by the UK Competition and Markets Authority (CMA), which has a provisional 1 March 2023 deadline.  

SIE President and CEO Jim Ryan met with EC officials on 8 September, following his public criticism of the transaction, one of the sources specified. 

Activision Blizzard is the developer of Call of Duty, which is widely regarded as one of the most successful gaming franchises of all time. 

The CMA in its Phase I summary said that it considered the game to be sufficiently important that losing access to it could significantly impact Sony’s revenues and user base.

Playstation developer Sony has publicly voiced concerns over whether Microsoft could limit access to Call of Duty, as reported.  

Sony is concerned that the acquisition would give Microsoft’s Xbox ecosystem a unique combination of technology and content and hence a potentially dominant position in gaming, causing serious harm to consumers, developers and rivals, said a third source familiar with the situation said.  

Sony takes the view that Call of Duty is a unique and irreplaceable game and the network effects are such that if Microsoft were to foreclose access, millions of users would migrate from PlayStation to Xbox, said the third source. Sony has been presenting economic evidence to substantiate its foreclosure concerns, working with economic consultants on its brief, said a fourth source familiar with the situation.

The acquisition doesn’t “pencil out” if Microsoft doesn’t continue to have Call of Duty available on all the platforms where players play and Microsoft has no intention to pull the game from PlayStation, said the fifth source.

The source noted that Microsoft’s intentions with Activision’s titles are similar to that of Minecraft, which it acquired in 2014, and which is still available on multiple platforms. It would be value destructive and harmful for Microsoft to withhold such an input, said the fifth source.

Sony does not have an in perpetuity agreement for Activision content, said the fifth source, adding that agreements for access to publisher content in the sector are usually short-term, often up to a year, and intended for parties to be able to withdraw from quickly.

Google [NASDAQ: GOOG] is also believed to be concerned about the deal and has expressed its concerns to the agencies assessing the deal, said two of the sources familiar.   

Over the summer, Google made a submission to Brazilian agency CADE as part of its review of the deal in which it flagged Call of Duty, World of Warcraft, Overwatch and Diablo as games that do not have any close competitors. 

Google declined to comment. 

A spokesperson for Sony referred to remarks by SIE CEO Jim Ryan in which he called Microsoft's offer to keep Call of Duty on PlayStation for three years "inadequate on many levels". "We want to guarantee PlayStation gamers continue to have the highest quality Call of Duty experience, and Microsoft’s proposal undermines this principle," said Ryan.

A Microsoft spokesperson said that the EC's review of the deal is progressing in line with the expected regulatory schedule and that the company remains confident that the acquisition will close in fiscal year 2023.”

"This deal will bring more competition to the gaming market and more choice for consumers and creators. We believe the concerns raised by Sony are unfounded and misleading," said the spokesperson in response to Sony's claims.

Activision did not respond to a request for comment.

Subsequent to publication on Dealreporter, this article was picked up by a number of news outlets

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