Bang in the gaming world: Sony agrees with Microsoft on a 10-year deal

The “Call of Duty” dispute on the Playstation is over. Sony has signed a deal with Microsoft to keep its top-grossing game series on Playstation for another ten years, even after Microsoft’s planned acquisition of Activision Blizzard. Then, as usual in business, a new contract must be negotiated.

The announcement came Sunday, shortly after a U.S. appeals court denied the FTC’s request to block the acquisition with an injunction.

Microsoft’s Xbox boss Phil Spencer confirmed via Twitterthat they signed a “binding agreement” to keep “Call of Duty” on the Playstation. Sony seems to have come to the conclusion that this was the best option left, as the Activision deal is de facto inevitable. Even if the British regulator is still the last hurdle, this will most likely not prevent the 69 billion euro takeover.

This ends a bitter battle between Microsoft and Activision on the one hand and Sony and the US regulator FTC on the other, which has been fought out in public and extremely emotionally in recent months. This comes after Microsoft announced its planned acquisition of Activision Blizzard in January 2022.

The “Call of Duty” series is one of the largest and most successful game brands; you could also say they are the crown jewels of Microsoft’s planned acquisition of Activision.

Sony bites the bull’s eye

Microsoft made it clear that the 10-year deal now in place with Sony – as it was with Nintendo before – is only valid for Call of Duty and not other Activision titles. Microsoft originally offered to the competitor in January 2022 that “all existing Activision console games will remain with Sony through December 31, 2027, including future versions of the ‘Call of Duty’ series or other current Activision brands”.

Sony refused.

With the new contract terms, Sony gets a significantly longer ten-year warranty for staying on the Playstation, but it is limited to “Call of Duty”.

Microsoft had already offered the Playstation group a ten-year contract for “Call of Duty” in December 2022. Sony again declined, telling the FTC it fears Microsoft could make Call of Duty an Xbox exclusive or even sabotage the Playstation versions of the game with deliberate bugs.

An email gives a deep insight

Sony’s attempt to prevent the takeover by citing the economic importance of “Call of Duty” proved to be a boomerang in court: During the hearing, Sony’s Playstation boss Jim Ryan had to read an email disclosed by Microsoft in which he another Sony executive wrote that he doesn’t think Microsoft is making Activision games exclusively for the Xbox. He was “pretty sure we’ll see ‘Call of Duty’ on the Playstation for many years to come”. In addition, Bungie itself has upgraded with the purchase of the former Xbox video game studio and will “more than be able to handle it” in the future.

For Microsoft’s lawyers, the revealing email was a godsend. They had always argued that it would make no sense for financial reasons for Microsoft to stop offering the most popular Activision game on the Playstation, especially since the Sony console has far more gamers than its own Xbox.

To clarify, going forward, at least 70 percent of the revenue from every Activision game sold on the Playstation must go to Microsoft. Call of Duty is consistently one of the best selling games on Playstation and unless Microsoft absolutely hates money, they won’t be without that steady stream of cash.

Xbox boss Spencer recently confirmed under oath in court that “Call of Duty” will remain on the Playstation.

Microsoft concession

To allay fears from competition watchdogs, Microsoft previously struck a similar deal with Nintendo to bring “Call of Duty” to Nintendo’s consoles for ten years. Microsoft has also agreed with several cloud gaming providers such as Nvidia that they will continue to offer “Call of Duty” and other Xbox/Activision Blizzard games on rival online services. The EU’s competition watchdogs in particular pressed for this.

Lots of broken dishes

The mystery surrounding Microsoft’s acquisition of Activision Blizzard lasted 18 months and left a lot of broken boards. For example, the Microsoft v. FTC court hearing revealed that Xbox boss Spencer sent his Sony counterpart Ryan a list of Activision games that would remain on the Playstation in August 2022. Sony was not happy about that and apparently missed out on popular titles.

Shortly afterwards, a rift occurred when Spencer told US medium The Verge that “Call of Duty” would remain on the Playstation for “at least a few more years after the current Sony contract”. Playstation boss Ryan was extremely annoyed at Microsoft’s “unsatisfactory” offer and that Spencer was chatting to the media about confidential negotiations.

Tensions escalated when Ryan reportedly told Activision CEO Bobby Kotick, “I don’t want another Call of Duty deal. I just want to prevent your merger.” Ryan is said to have said this on February 21 on the sidelines of a meeting between Microsoft, Sony and Activision with the EU competition watchdogs in Brussels. Ryan later said he made it clear to Kotick that he believed the acquisition was anti-competitive.

Microsoft is shopping

Sony’s suspicions aren’t entirely unfounded: documents released during the hearing revealed that Microsoft was targeting several other game publishers prior to the Activision deal. The group is trying to catch up with Sony by acquiring game development companies and, in particular, making its “Xbox Game Pass” subscription and its cloud gaming offerings more attractive. With the Activision purchase, several popular titles would be available on Microsoft’s gaming subscription service from day one.

The deal, which should close on Tuesday, is worth $69 billion and would be one of the largest acquisitions in technology.

The competition authorities in the EU and about 40 other countries have already given the green light for the acquisition. Last week, a US judge dismissed a pending FTC lawsuit, further paving the way for the deal. According to the judge, US antitrust regulators could not make it credible that the acquisition “could significantly harm competition”.

The final hurdle is opposition from the UK competition authorities. To satisfy local regulator CMA, Microsoft is willing to give up part of its cloud gaming business in the UK, financial service Bloomberg reported.

Microsoft and Activision Blizzard originally set themselves a deadline of July 18, 2023 to complete the acquisition. It remains unclear whether an agreement will be reached with the CMA by Tuesday. As a result, the date for a final decision has been moved from July 18 to August 29. Since Sony and Microsoft have reached an agreement, things can now happen very quickly until the deal is finalized.