How 'essential' is Call of Duty? Microsoft and Sony can’t agree.
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Friday, we’re examining the public back-and-forth between Microsoft and Sony over how essential Call of Duty is and whether the Activision Blizzard acquisition might harm the console market. Also: what to read, watch and play this weekend.
The Call of Duty custody battle
The fate of one of entertainment’s biggest, longest-running and most lucrative franchises hangs in the balance, and it all comes down to whether Microsoft and Sony can play nice. We’re talking about Call of Duty, which has, for better or worse, become the benchmark against which the industry’s old guard judges success, both culturally and financially.
Now, Microsoft is in the process of acquiring its parent company, Activision Blizzard, and the resulting regulatory attention has put a spotlight both on how important Call of Duty is to the overall industry and what type of bargaining chip it presents in Microsoft’s long-simmering feud with its PlayStation rival. This month, those arguments spilled out into the public, and the back-and-forth has raised fundamental questions about Call of Duty’s longevity, platform exclusivity and the industry’s live service future.
Microsoft and Sony disagree about COD’s importance. The core of the debate comes down to how “essential” the series is, in Sony’s words, and whether Microsoft owning the property, and potentially blocking PlayStation players from accessing some parts of it in the future, would cause harm to Sony’s business and the console market in general. The backdrop here is important.
- Call of Duty is the best-selling game year after year when judged by retail sales, because Activision puts out a new entry every fall and has done so for close to two decades.
- In the U.S., where console gaming reigns supreme, “through the end of 2021, Call of Duty has been the best-selling video game franchise in premium game sales … for 13 consecutive years,” NPD game director Mat Piscatella told me.
- That’s excluding microtransactions and downloadable content (aka games that monetize like Fortnite), but Call of Duty’s financial success in traditional retail means it sells tens of millions more copies than some of its closest competitors, every single year.
- “Call of Duty is one of the key franchises that is closely associated with the console market, and for a lot of observers it serves as a proxy for the overall health of the ecosystem,” said Joost van Dreunen, a former game analyst and professor at New York University. “There’s a history of Microsoft and Sony fencing with ownership and exclusivity rights around the Call of Duty franchise.”
- Sony sees the series as vital because its large PS4 install base has made PlayStation the primary destination for playing it with friends for almost a decade, in turn generating a lot of third-party revenue thanks to Sony’s platform commissions and publishing cuts.
- So when submitting comment to Brazil’s regulatory authority on the matter, Sony had a lot to say last week: “Call of Duty is so popular that it influences users’ choice of console, and its community of loyal users is entrenched enough that even if a competitor had the budget to develop a similar product, it would not be able to rival it.” (Unlike in the U.S., filings to Brazil’s regulatory body are made public.)
- Sony said the franchise is “essential,” and its importance “indescribable.” Microsoft, on the other hand, has underplayed Call of Duty’s importance, telling New Zealand regulators back in June that Activision Blizzard doesn’t make “must-have” games.
Microsoft and Sony are both self-interested here. Sony may be employing a bit of hyperbole in its description of Call of Duty. But Microsoft isn’t fooling anyone when it says Activision doesn’t make “must-have” games; why spend close to $70 billion for games that won’t tilt the scales?
- The real question is where the truth is: Is it somewhere in the middle, and if so, how can regulators ensure both sides will be fair to one another and consumers in the absence of good-faith agreements?
- It's in both console makers’ interest to play nice, and before now they were. Microsoft said in January it would honor its existing Call of Duty agreements with Sony if the deal went through.
- Microsoft President Brad Smith said a month later that Microsoft had “committed to Sony that we will also make them available on PlayStation beyond the existing agreement and into the future.” Sony didn’t seem especially worried until it came time to submit regulatory comments.
- Microsoft’s responses to Sony have also begun to escalate. In its own Brazil filing published just this week, Microsoft argued that Sony is in fact not worried about Call of Duty, but instead the looming threat of Xbox Game Pass and subscription gaming.
- Sony “does not want attractive subscription services to threaten its dominance in the digital distribution market for console games," Microsoft wrote in the filing, as translated from Portuguese (via VGC). "In other words, Sony rails against the introduction of new monetization models capable of challenging its business model.”
- Microsoft further accused Sony of paying developers for so-called “blocking rights” to prevent games from coming to Game Pass in the future. It also said Sony’s statements regarding Call of Duty and the harms of exclusivity were “incoherent,” considering Sony has mastered the strategy of using exclusive games to drive ecosystem growth.
- “It only reveals, once again, a fear about an innovative business model that offers high-quality content at low costs to gamers, threatening a leadership that has been forged from a device-centric and exclusivity-focused strategy over the years,” Microsoft wrote.
Microsoft’s plans are likely far less sinister than Sony fears, despite the Xbox maker’s aggressive retorts.
- “Chances are they’ll reach some type of agreement on this,” van Dreunen said. (And regulators may demand it for the deal to close, too.) “I don't think it’s a shut door. Sony has to say something publicly, otherwise they're not advocating for their audience. But it’s not black and white.
- “Microsoft’s tenet here is, ‘We need to be cross-platform,’” van Dreunen added. “‘They're not going to cut out 100 million console players’ — that would be the dumbest thing they could do.”
- Indeed, Microsoft said as much in its response. “The reality is that the strategy of retaining Activision Blizzard’s games by not distributing them in rival console shops would simply not be profitable for Microsoft,” Microsoft claimed in the Brazil filing.
- Microsoft goes on to compliment the loyalty of PlayStation players and suggest its Game Pass strategy would make offsetting the losses from exclusivity very difficult.
- “They would shoot themselves in the foot making it an exclusive. We’re past that point,” van Dreunen said. Instead, he suggested Microsoft could add the annual Call of Duty premium release to Game Pass, reserving some perks or add-ons for Xbox players, all while preserving PlayStation players' access to the series.
But one question still looms large over the feud: Is Call of Duty actually essential? Van Dreunen said it’s undeniable: “If I had to pick either side, Call of Duty is a must-have franchise. Purely because when I go on Netflix, I expect ‘Stranger Things’ and when I go to Disney it needs to have ‘Iron Man.’” In gaming, Call of Duty is in rare company alongside Super Mario, Grand Theft Auto and Minecraft.
“Nintendo has done fine not having Call of Duty,” van Dreunen said. But “for the console audience that Microsoft and Sony are pursuing, they each need to have Call of Duty on there.” Now, it’s just a matter of seeing how Microsoft plans to reap the most benefit from owning the series, getting the deal closed and keeping players, even PlayStation ones, coming back to the franchise year after year.
— Nick Statt
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#TGIF: How to spend your weekend
“Light & Magic” — Disney+. You won’t find any hard-hitting investigative journalism in this six-part documentary about Disney’s special effects unit Industrial Light & Magic, produced by Disney for Disney’s very own streaming service. Still, if you’re a “Star Wars” fan, VFX geek or even just interested in how some of Hollywood’s biggest blockbusters have been made, this is a great oral history about the most influential gang of movie magic wizards. Plus, watching the entire show gives you a great idea of how far Hollywood has come, all the way from the miniature models built for the first “Star Wars” to the virtual production sets of “The Mandalorian.”
Julie Otsuka's "The Swimmers” — Penguin Random House. “The Swimmers” is one of those novels that seems to be about nothing in particular, as it casually talks about the lives of a group of swimming pool attendees, who have little in common but their shared love for laps. Then, it zooms in on one of those swimmers, and suddenly becomes about everything: life, aging, memories and the fragility of it all. I almost gave up on this book a few dozen pages in because it seemed too inconsequential, but I’m so glad I stuck with it. Because just like doing all those laps you set out to swim, it’s ultimately immensely rewarding.
FitXR — Meta Quest. Formerly known as BoxVR, FitXR has been a popular fitness app on the Quest for some time. Boxing is still a key part of the app’s workout regimen, but players can now also opt for dance or high-intensity interval training to get their blood pumping. This week, FitXR introduced a mobile companion app that helps you track and follow through on your workout goals, find new classes and even review detailed stats about past workouts. If that sounds like serious business, don’t worry: The VR workouts themselves are immersive and fun enough to make breaking a sweat feel like a game.
“Never Have I Ever” — Netflix. Mindy Kaling’s Netflix comedy “Never Have I Ever” is a bit like this generation’s “Gilmore Girls”: It’s witty, sweet and acutely aware of what it means to grow up as a teenager today — which also means it’s more raunchy and a lot less white than Lorelai and Rory’s sheltered small-town world. The third season premieres on Netflix today, and if the critics are to be believed, it’s going to be brilliant.
— Janko Roettgers
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Thoughts, questions, tips? Send them to email@example.com. Enjoy your day, see you Tuesday.