Microsoft’s $75 billion bid for Activision Blizzard propelled Sony into its biggest one-day decline since the global financial crisis, with shares in the Japanese entertainment conglomerate closing 12.8 percent lower on Wednesday.
The overnight news of the deal also sparked a wave of purchases in Japan’s gaming sector, with shares in Square Enix and Capcom rising more than 3.5 percent after speculation they could become Sony takeover targets or as part of a broader land grab.
Shares in Nintendo and Konami rose as much as 2.51 and 3.25 percent in Tokyo on Wednesday, as investors bet that some Japanese companies would view domestic mergers as a defensive measure against takeovers.
The blow to Sony, which wiped $20 billion from its valuation, ended a run that had sent the stock to its 21-year high in early 2022.
Sony’s long-term shareholders said the shares were being punished over fears that the Japanese company had been pressured into making a major acquisition of its own, either by counter-offering Activision or seeking another company. target that would now yield a high premium.
“Does Sony really need to tell investors in their two-week earnings meeting that they plan to grow organically after their rival just closed a $70 billion deal? If they want to buy something, they have a huge edge on their own property regarding mergers and acquisitions,” said industry analyst Serkan Toto, noting that Sony’s stock price drop was a typical overreaction from gaming industry investors.
Tokyo traders said the shares were also crushed by speculation that Microsoft’s deal would dramatically increase the attractiveness of the company’s Xbox Game Pass, a subscription service that allows members to play games on multiple platforms and directly challenges Sony’s console-centric model.
Analysts Said They Are Concerned Microsoft Could Make Activision’s Hit Franchise Duty exclusive also contributed to the Sony share price drop. Available on all consoles, including Sony’s PlayStation, the series has become the hub of huge global online communities and is a prime example of games monetizing long after their initial release.
“The market is guessing what could happen with Duty. It’s like economic suicide if Microsoft makes the franchise exclusive to its own platform, but they don’t care if it makes their platform stronger,” said David Gibson, an analyst at MST Financial.
“What it could do is get Sony to go to other publishers that make first-person shooters, like EA [Electronic Arts], and pay for exclusivity for a period of time to support the PlayStation platform,” he said.
Gibson added that the Microsoft deal is unlikely to trigger an immediate response from Sony, whose response to the Activision acquisition would be more likely to stick to its long-term policy of building high-quality franchises through smaller acquisitions.
“The [Microsoft] deal may not be as negative as people think,” he said.
Sony Interactive Entertainment, Sony’s gaming division, declined to comment. Square Enix, Capcom and Nintendo declined to comment.
Damian Thong, a technology industry analyst at Macquarie in Tokyo, said Microsoft’s hold on Activision reflected how the maturing console games business would fuel competition with Sony, as the US tech group worked to counter its Japanese rival’s market share in consoles. with heavy investments in content.
“If Sony wants to emulate what Microsoft is doing, they need to move to PC and mobile and then buy [the] kind of multiplayer games that work on those platforms,” Thong said. “That’s expensive.”
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