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Enthusiasts of the popular first-person shooter game Call of Duty are passionate gamers, often spending more than 10 hours a day playing on the PlayStation console. With approximately 100 million active players, the game’s heavy in-game spending has made it one of the most profitable games in history.
Therefore, it is unsurprising that shares in Sony Group, the maker of PlayStation, experienced a decline after a US federal court ruled in favor of Microsoft’s $69 billion acquisition of Activision Blizzard.
The judge determined that the merger would not negatively impact competition in the gaming industry, causing the UK’s competition regulator, the Competition and Marketing Authority, to reconsider its opposition to the deal.
Sony’s concern is valid considering the significant sales and user loyalty that Call of Duty generates. Players of the game are estimated to have spent an average of $16 billion per year between 2019 and 2021.
In order to facilitate a smooth takeover process, Microsoft has already committed to a binding 10-year contract to bring the Call of Duty franchise and other Xbox titles to Nintendo consoles.
For many gamers, Call of Duty is the primary reason to own a PlayStation. It is estimated that 1 million PlayStation owners use the console solely for playing this game. If Microsoft offers Call of Duty for free on its Xbox Game Pass service, Sony would likely experience a decline in console sales. Sony’s main competitors in the gaming business are Nintendo’s Switch and Microsoft’s Xbox consoles.
Sony’s shares have decreased by over 10% in the past month and are currently trading at about half their value from three years ago, with a forward earnings multiple of 17 times.
The Japanese electronics group is already expecting a decline in profits for the current fiscal year due to weaker performance in its financial services business. If sales in Sony’s gaming division, which contributes the most to the company’s revenue, also decline, it would offset any gains made by its music and films businesses, resulting in a further weakening of the profit outlook.
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