Sony loses US$20 bn in market value after Microsoft-Activision deal

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Sony loses US$20 bn in market value after Microsoft-Activision deal

 Sony loses US$20 bn in market value after Microsoft-Activision deal
Image source: Michael Vi,Shutterstock


  • Sony and Microsoft are top competitors in the gaming industry.

  • Microsoft’s big-ticket purchase is expected to unleash a fierce rivalry between the two.

  • Microsoft’s Xbox console is a direct competitor to Sony’s PlayStation.

Sony Group Corporation on Wednesday suffered losses of US$20 billion in market value after its shares plunged 13% in the Tokyo exchange following the Microsoft-Activision deal.

Bloomberg reported that it was the biggest drop since October 2008.

The Microsoft Corporation (MSFT) this week announced plans to acquire the gaming company Activision Blizzard Inc. for US$68.7 billion, its biggest deal since LinkedIn’s purchase in 2016.

The software giant had acquired the social media company for US$26 billion.

Sony (SONY) and Microsoft are top competitors in the gaming space. Microsoft’s Xbox console competes directly with Sony’s PlayStation. Microsoft’s big-ticket purchase is likely to unleash a fierce rivalry between the two in an increasingly competitive industry.

The transaction is expected to complete in fiscal 2023.

The Redmond, Washington-based technology company stands to gain Activision’s massive subscriber base, estimated at a staggering 390 million as of September 30, 2021.

In addition, it will own Activision’s hugely successful gaming franchises such as World of Warcraft, Candy Crush, Call of Duty, Diablo, and Overwatch.

The deal could put Microsoft in an unassailable position in the market. The acquisition has already made the software maker the world’s third-largest gaming company. Sony also makes gaming consoles and hardware like Microsoft, accounting for about 30% of its total revenue.

Microsoft’s Game Pass subscribers surpassed 25 million. The company hopes Activision’s massive subscriber base would give it a strong foothold in the market and help fend off competition.

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Sony loses US$20 bn in market value after Microsoft-Activision deal

Source: Pixabay

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Sony’s headwinds to get tougher

On Tuesday, the software maker said it “will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass”. Xbox chief Phil Spencer said Activision’s highly successful franchises would bring more variety and value to its gaming portfolio.

Sony maintained a consistent lead in sales over Microsoft’s offerings. But now, with Microsoft’s blockbuster acquisition, Sony’s headwinds are likely to get tougher, say analysts.

The gaming industry is upbeat after the Microsoft deal. Shares of publishers like Capcom Co. and Square Enix Holdings Co. were up nearly 4% in Tokyo on Wednesday. Capcom’s American depository receipts (ADRs) were up 3.39% at 1:26 pm ET on Wednesday. With strong content and IP portfolios, analysts forecast that gaming companies would see enhanced valuations.

Sony will now be under pressure to match Microsoft’s spending on acquisitions and product diversification. “Sony will struggle to match Microsoft in terms of money it can spend to buy popular game IP,” Bloomberg quoted analyst Kazunori Ito as saying.


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