Activision: The Deal is Done – Now What?

Since the Activision merger was announced in January last year, it’s been all we’ve talked about. No gaming news has quite lived up to this giant behemoth, edging ever more closely to the finish line. And it probably never will again.

But it is indeed now done. What impact is it going to have on the industry? Will Microsoft keep buying? And where does this leave PlayStation?

Suffice it to say this deal is going to feel like a lot of nothing… until it doesn’t.

The Future with Activision

I’m not exaggerating. We know that’s how it will be, because that’s exactly how it was with Bethesda. There will be a burst of excitement when a catalogue of older games hit Game Pass, and again when the first Activision games hit Game Pass day one. Double points if that game is called Call of Duty.

But actually, the next couple of years are going to feel like nothing at all has changed. Marketing for the next Call of Duty game will probably have a green splash screen rather than a blue one. Maybe, although unlikely, there will be an exclusive game in the next 12 months. How about that Spyro 4 that’s been teased throughout the year?

But chances are, unless Activision has something immediately up their sleeve, the biggest difference will be that Activision revenue now sits comfortably alongside Xbox revenue. In the short-term that potentially means more money for Game Pass. But outside of Game Pass, you’re unlikely to see much difference.

Will Microsoft Keep Buying?

Yes.

Oh, you want more?

Everybody involved in Xbox has said they will continue to buy following the closure of the Activision merger. It’s now a matter of time and scope.

For instance, we know both Paradox and SEGA have been high on their lists. Both have a great relationship with Xbox, with their games coming regularly to Game Pass day one. If either were announced tomorrow, there would be little to no surprise about the target.

We know their targets: PC and mobile growth, family content and Japanese developers. And IP. SEGA is the obvious target to bolster all of that, but you can chuck a dart at as many developers as you like that fit one or more of those options.

Naturally, there isn’t a blank cheque. And they still have to get through regulators. They can’t just go buy Valve or Take-Two.

And they’ve so far seemed to be on the hunt for deals. Bethesda were in a bad spot, Activision were in the middle of controversy. So look out for companies that own their own IP, that have a focus on PC or mobile (or both), or can offer up lots of family content. Bonus points if it’s in Japan. Bonus bonus points if a purchase comes at just the right time.

Where Does This Leave PlayStation?

PlayStation’s place in the industry now is really interesting.

They’re still selling a huge amount of consoles. They’re still – at least they seem to be – on top of the big three. Revenues and profits may be closer than they appear, but community sentiment all goes one way.

Their games are critically acclaimed and hugely popular with fans. Nothing is going to change any of that.

But their business model is shifting. Their unique selling point is huge blockbuster “too big to fail” games. They take years to make. You can’t rely on new IPs. We went over this in regards to Capcom the other day.

Now they’re adding GAAS, mobile and PC to the line-up in an increasingly large way. And they’re doing it in the hopes of relieving some of that pressure. If – as an extreme example – Sony can launch their own Fortnite, the terrifying potential of God of War 3 bombing and taking with it a significant chunk of profit is gone. But nobody can just launch a Fortnite. It’s going to be a period of experimentation and adjustment.

And this has nothing to do with Activision, that’s just where PlayStation are. What Activision has proven is that Sony can’t compete on that level. Few companies can.

But it also can’t just sit back and become a Nintendo. The latter relies on low, carefully managed budgets and huge successes. Sony relies on gigantic budgets. The Last of Us doesn’t make a penny if it looks like Animal Crossing.

And so there’s a period of adjustment for the industry and for Sony itself. Activision won’t change much directly, but a more competitive Microsoft and a more cautious Sony could mean we see a very different PlayStation in years to come.

The Future of the Industry

Thus far we’ve talked about the small waves this deal will actually make, and certainly in the short term. It will help cement Microsoft’s place in gaming – they’re coming for Tencent, not Sony. That might seem, on the surface, a little disappointing, given the cost and difficulty involved with actually making the purchase. Nobody pays nearly $70b for small waves.

But small waves add up. Bethesda was a small wave. SEGA – or whoever – would be a small wave. But the three big purchases combined, plus all the studios Xbox has picked up over the last five years? That’s a big wave.

Microsoft’s revenue goes up, so they spend more in gaming. Their aim is to bring in more than Tencent, and if they’re successful that in itself will be hugely different than this time last generation. Microsoft will be the biggest player, and then some, regardless of how many boxes they shift out of shop doors.

But that’s not necessarily a change gamers will feel. Maybe they’ll buy an Xbox instead of a PlayStation. Maybe they’ll subscribe to Game Pass and play in the cloud or on PC. It doesn’t really matter.

But it does work towards making Game Pass more successful. And that could be a major change for the industry. The subscription model will never replace the traditional $70 game, but it will take a bigger slice of that market. And the bigger one gets, the more publishers will have to rely on it to make money.

How will that impact things in the future? Nobody knows. But if nothing else, it means access to games will become cheaper – if that is what you want – and that can never be a bad thing.