What does the Microsoft-Activision deal mean for Sony?

Yahoo Finance's Daniel Howley details the impact Microsoft's acquisition of Activision has for the video game space and competitors like Sony, cloud gaming innovations, and the benefits this deal holds for Xbox owners.

Video transcript

- Welcome back to Yahoo Finance. While Xbox's acquisition of Activision Blizzard is one of the biggest deals in gaming history, and the latest in a series of key purchases for Microsoft's video game division. But what does that mean for Sony's PlayStation and other players in the space? Now finance reporter, Dan Howley joins us with the latest. Dan.

- That's right. Microsoft's purchase of Activision Blizzard for nearly $70 billion sent shockwaves through the tech and video game industries. A lot of the talk has been around the metaverse, the future of gaming and what this means for Microsoft. But I want to take it back to what it means currently for the company, and the big benefit that Microsoft is going to see as a result. And that's to its Game Pass Service. Now, this is Microsoft's subscription service where gamers can either download games to their Xbox or PC for $9.99 a month. It's more than 100 games. A lot of them are day and date releases. Meaning the same day that you could go and buy them online or buy them in store, you can get them on Game Pass and play them without having to make that purchase. You just use that $9.99 a month. That's a great service, very inexpensive. But the real winner here is Game Pass Ultimate. Now, this is really kind of the future of gaming in general, but more specifically for Microsoft. What it allows you to do is cloud gaming. So what you'll be able to do is log on to the Xbox Game Pass app, or Xbox app on your Windows PC. Login via the browser that you have on your iPhone or iPad, Chromebook, smart TV, basically anywhere that you can get a browser or the app. And then be able to stream games similar to what we are able to do at Netflix to those devices.

So this is going to be the future of games. It significantly improves margins for Microsoft because they don't have to worry about clunky hardware. The R&D that goes into that, they have their own Azure cloud service. So they have the backbone to do this. And that's where they're going to see the biggest benefit. Currently, Game Pass has something North of 25 million subscribers. Microsoft is really pushing this. And right now that price at $14.99, really heavily subsidized considering the amount of games that are on there. And outside of the Activision Blizzard titles that they're getting and their own Microsoft titles, they also give players access to Ubisoft titles, Take-two interactive titles, and EA titles. So it's just a behemoth. Sony is working on something of a similar offering of its own. It has a kind of cloud gaming service in PlayStation now, but it's not nearly as robust as what Microsoft has. And while they are working on their own service, Microsoft is able to bring in both PC and Xbox games and that's a big, big win for them. So the fact that they have all these different properties and that they already have the service up and running, means that Sony really has its back up against the wall. And while it did beat Microsoft when it comes to console sales in the latest generations, I don't know if they're going to be able to keep that win up going forward.

- Yeah, Dan, real quick. Do you foresee Microsoft taking these Activision franchises like Call of Duty and saying, look, they're exclusive to the Xbox?

- Yeah, it's a good question. Right now they've already started doing that with their ZeniMax acquisition. Bethesda has a game coming out called Starfield, highly anticipated. Microsoft spent $7.5 billion and they basically said, look, we spent the money on that. We have to do something to make it back, so we're going to make that game exclusive. They also own the property rights to the Elder Scrolls series, something that a lot of gamers are waiting for a new version to come out. And that may be exclusive to Xbox. Now, as far as the Activision Blizzard acquisition, that could mean that Call of Duty eventually is an Xbox, PC only title, leaving Sony and Nintendo out to dry. What has to happen though, is obviously the acquisition has to close, and then any existing deals that Sony had with Activision Blizzard have to lapse. And then Microsoft can make that decision. Whether or not it makes financial sense, it could get more gamers onto Game Pass, but then they lose that huge chunk of money that they would get from people making purchases on the PlayStation. So it's still up in the air. I think smaller titles will definitely be exclusive to the Xbox and PC going forward though.

- All right Dan Howley, thank you for that report. We will leave it there.