Microsoft, Sony, and Call of Duty (Premium)

Sony and Microsoft are engaged in a war of words in legal filings aimed largely at determining the future of the Call of Duty franchise. There’s a lot at stake here, given the billions of dollars that Call of Duty generates every year. But this problem is easily solved.

Microsoft’s blockbuster Activision Blizzard $67.8 acquisition attempt is an interesting wrinkle in the ongoing debates about console exclusives and the recent shift to subscription-based cloud gaming, of course. But the basics are the same, and, more specifically, Sony and Microsoft have been at war over Call of Duty for 15 years. It started when Microsoft obtained an exclusivity arrangement with Activision in 2007, ensuring that map packs—what we now called Downloadable Content (DLC)—appeared first on Xbox 360, ensuring that that console was the go-to for first-person shooter fans. And then it escalated in 2015, when Sony snatched away those rights for PlayStation, suddenly making Xbox gamers second-class Call of Duty citizens going forward.

As a Call of Duty fan, I felt the pain in 2015, but it reached new heights of absurdity three years later when Xbox gamers didn’t get the final DLC drop for Call of Duty: WWII, which had been released the year before, until after the next COD title, Black Ops 4, launched. But then Activision suddenly and without explanation changed its DLC release policies; now, DLC would appear on Xbox (and PC) just 7 days after it did on PlayStation, as opposed to the original month.

These days, I’m not even sure there is an exclusivity window anymore. Largely because I’ve checked out more than a bit on COD in recent years since the two biggest titles in this time frame, the Modern Warfare remake (2019) and Black Ops: Cold War (2020), changed multiplayer dynamics for the worse so much that the multiplayer components of the games became unplayable for me. And because COD: Vanguard (2021), the most recent title, is just not that good. So I’ve pretty much skipped the three newest games and have been playing older titles instead, mostly 2018’s Black Ops 4. (Which, yes, is sad. I hope that changes with Modern Warfare 2, but I’m being realistic here too.)

Anyway. This isn’t so much about me as it is about Microsoft trying very much to convince antitrust regulators from around the world that its acquisition of Activision Blizzard, which owns COD, isn’t just OK but will somehow benefit the industry. And about Sony trying to prevent this from happening.

I would normally make some sort of Godzilla and King Kong comparison here, noting the thrillingly voyeuristic spectacle of two videogame giants going at it. But a better comparison, if you follow sports, is the ongoing Boston Red Sox and New York Yankees rivalry, which was one-sided until Boston started spending as much on its teams as did New York. As a result, things have gone quite a bit differently in recent years.

Call of Duty exclusivity, likewise, was always about spending money on talent. Here’s Activision, investing billions in the three studios that can keep to an annual release schedule for the lucrative franchise, with blockbuster movie-like budgets and marketing campaigns for each. And then here’s Microsoft and Sony, each trying to outspend each other to keep gamers on their platforms, and not just if they play COD or other Activision games.

Sony must have seen some damage from Microsoft’s initial COD coup, and when you consider the titles that were released in its wake, you can see the problem: COD: Modern Warfare 4 catapulted the series to fame and fortune, and it was followed by a several year period during which it could do no wrong, with the releases of COD: World at War, Modern Warfare 2, Black Ops, Modern Warfare 3, and Black Ops 2. Activision stumbled badly with Ghosts (which I actually loved) and Advanced Warfare, but it recovered nicely with Black Ops 3 in 2015. Which is, of course, when Sony swooped in.

Not helping matters, Microsoft transitioned from the Xbox 360 to the disastrous Xbox One during this period. Thanks to recent legal filings related to Microsoft’s Activision Blizzard acquisition, we now know that the rumors are true: Despite matching PlayStation 3 sales with the Xbox 360, the Xbox One was initially so horrible—with its high price/Kinect requirement and tank-like form factor—that Sony’s PS4 took off like a rocket and ultimately went on to outsell the Xbox One by over two-to-one. Xbox, suddenly, wasn’t necessarily the best home for first-person shooters.

Interestingly, COD then suffered from a number of setbacks that today make the franchise a lot less lucrative. There were bad games—like COD: Infinite Warfare and Vanguard—and meh games, like WWII. There were some high points, like Black Ops 4, Modern Warfare (remake), and Black Ops Cold War. Mobile games. And some unexpected competition from so-called battle royale titles, especially Fortnite, triggering Activision to push COD into this world with Blackout and then Warzone. Overall, Activision has sold over 400 million of all COD titles combined, but it has also lost tens of millions of gamers in recent years. It’s still the biggest of the big. But it’s clearly on the way down too.

When Microsoft and Sony were simply trying to outspend each other to keep COD gamers happy, the world was simple: one could safely choose whatever console from either company that they preferred and be sure of a good experience. What Sony is worried about with Microsoft’s Activision Blizzard acquisition is likewise simple, but it’s also understandable: Microsoft, which just failed to sell even half as many consoles as did Sony in the previous generation, has pivoted to change the rules of the game. It is meeting gamers where they are and is offering an excellent cloud-streaming service that obviates whatever advantages one might gain by buying particular hardware. And it is buying up game studios so it can release new games, both blockbusters and smaller titles, day and date to tis paying subscribers.

What if Microsoft makes COD an Xbox exclusive? A real Xbox exclusive, one that is no longer available on the PlayStation? The impact would be material: COD gamers, and perhaps first persons shooter fans in general, would no longer even consider Sony’s consoles.

That Sony has perhaps played this exclusivity game the most aggressively isn’t really ironic or hypocritical, it was just good business. But I’ve always argued against exclusivity and feel that game makers—including the platform players like Nintendo, Sony, and Microsoft—should make their content as broadly available as possible. (Why Nintendo has never made a bigger push into mobile games is unclear. It would make a fortune reselling older titles on mobile.) And in this looming era of cloud gaming, that is truer than ever.

Normally, I’d pooh-pooh any suggestion that Microsoft would take COD away from the PlayStation, given how much money the franchise would lose in doing so. Plus, it’s not hard to imagine a world in which future COD titles are made available traditionally on all consoles and on PC while being offered, too, along with the back catalog, to Xbox Game Pass subscribers, and streaming via Xbox Cloud Gaming. Why not do this?

But Xbox chief Phil Spencer has sadly implied that future titles from Microsoft’s studios, including Bethesda, could become Xbox exclusives. It’s not hard to believe that the software giant might be out for revenge for its past market failures and defeats at the hands of Sony.

Here’s the thing. The process that Microsoft is now undergoing is designed to result in compromises that will enable it to complete its Activision Blizzard acquisition. A purchase this big and complex, with such wide-ranging implications, was never going to sail through with global regulator approval. Instead, these regulators have reached out to Microsoft and its competitors to understand its intentions and their fears. And many of them will demand compromises that, if not met, will scuttle the deal.

And the most obvious of these compromises will include keeping COD—and, I’m sure, other games and franchises—from becoming Xbox exclusives. There is absolutely no reason to believe that this acquisition will be approved without such a requirement. This will be good for the industry, but it’s also the best outcome for COD fans and gamers in general. As noted, gamers should be able to play the games they prefer on the hardware they prefer. And a commonsense compromise will ensure that happens here, while still giving Xbox fans the access they want to what is still the most lucrative first-person shooter on earth.

What’s less obvious is what, if anything, Activision Blizzard (or, I guess, Microsoft) can do the prevent the COD gamer base from continuing its death spiral. This may be a situation like the PC market, where we see a fall from one-time highs and reach a new normal. Or COD may have simply run its course, with no new ideas and an endless cavalcade of remakes.

Hey, it worked for Hollywood. It could work here too.