Sam Nussey

TOKYO (Reuters). Sony As the Japanese conglomerate looks to expand on many fronts including electric cars, the (NYSE:) Group sits atop gaming’s sector.

Microsoft Corp (NASDAQ :), which is a latecomer in the console generational battle against Sony, made a big step to prepare itself for “metaverse” (a proposal immersive gaming, shopping, socialising, and game-sharing experience that allows people to play online). Activision Blizzard has signed a $69 million deal with “Call of Duty” developer (NASDAQ :).

On Wednesday, Sony shares plunged 13% amid concerns that Activision titles might be removed from PlayStation 4 systems.

Serkan Toto of Kantan Games, a Tokyo-based consultancy for games and entertainment said that “they’re basically trying build a monster.” I don’t believe Microsoft will spend $70 billion in order to be a provider of software for Sony platforms.

This contrasts with Sony’s more frontal approach. It has made incremental deals, and won praise for its network of gaming studios within the company that have created hits like “Spider-Man,” and “God of War.” Analysts believe it and other giants may feel the pressure to respond with more deals.

Microsoft’s acquisition of Activision was made possible by the company’s vast portfolio of businesses including cloud services and software. Its market capitalization is more than 14x that of Japan.

Activision has been criticized by many analysts as being a business that is struggling to recover from allegations of harassment and misconduct against managers. Analysts also point out the loss in momentum for its major franchises.

Mio Kato of LightStream Research, who wrote on Smartkarma’s platform, said that the developer was “basically a semi-distressed asset.” We are skeptical about Microsoft’s ability to compete against PlayStation because of their backward-looking strategy.

PRICE INTENDS TO CONFORM

Microsoft will most likely use the deal to expand its Game Pass subscription, which could raise concerns about Sony following suit. Flat fees for games can reduce sales and decrease margins.

Amir Anvarzadeh of Asymmetric Advisors wrote, “Most analysts had been sleeping during these developments. Cheering Sony’s stronger movies, music business to justify higher ratings.”

In recent years, tech giants like Amazon (NASDAQ) and Apple (NASDAQ) also branched into gaming. However they have not been able to produce any hits.

Sony has, however, a number of highly anticipated titles in its pipeline, including “Gran Turismo 7”, and “Horizon Forbidden West”. Microsoft has heavily relied on the Halo series. The latest installment was released in December, but it wasn’t until now.

Cloud technology is advancing rapidly and there are no ties between consoles and it. Consumers will be spending more time in virtual reality, and this could attract investment from companies like Meta (NASDAQ: Facebook).

This change was compared with the historic shift to autonomous and electric vehicles.

Sony plans to release a new generation of virtual reality headsets. It is also looking at entering the electric vehicle business in order to capitalize on its strengths in entertainment, chips, and other areas.

Tuesday’s trading in shares of gaming companies Square Enix and Capcom rose due to speculation about Activision’s potential for more consolidation.

Sony is seen by many as a potential buyer, being a Japanese sector leader at a moment when other local businesses are losing ground against overseas competitors across a wide range of sectors.

“Sony may come under pressure to do more M&A,” Jefferies analyst Atul Goyal wrote in a note, adding that “if there are no regulatory bottlenecks, then Microsoft may go after another target in the not too distant future.”