Microsoft-Activision trial reveals game industry secrets
Add Axios as your preferred source to
see more of our stories on Google.
Photo illustration: Aïda Amer/Axios. Photo: Phil Barker/Future Publishing and Thiago Prudencio/SOPA Images/LightRocket via Getty Images
While a federal judge mulls whether to hold up Microsoft's purchase of Activision Blizzard, the five-day hearing has already provided the equivalent of a cheat code for the inner workings of the game industry.
Why it matters: Gaming is a huge business, but many of its financial details are jealously guarded secrets: How much each title costs to produce and how much it makes, as well as the strategy that goes into making a game exclusive to one of the major consoles.
Catch-up quick: Closing arguments were heard Thursday in this round of the case. The hearing is weighing whether the Federal Trade Commission's arguments are sufficiently plausible that a federal court should grant a preliminary injunction against the deal.
- Microsoft and Activision both say the deal will be scuttled if a preliminary injunction is granted, because it would take too long to let the case play out.
Between the lines: Here are three things we learned from the exhibits and testimony.
1. Gaming via the cloud is coming, but not quickly.
- Xbox execs, who have been promoting a way to play console games over the cloud through Xbox Game Pass for the last two years, testified that most of the uptake so far has been by console gamers trying games over the cloud before downloading them. They've not yet wooed many players using the cloud to play Xbox games on their phones.
- Sony chief Jim Ryan testified that he nevertheless expects gaming over the cloud to be the future, becoming a significant option for gamers between 2025 and 2035.
2. Major titles can cost as much as a Hollywood blockbuster to produce, but a hit can also produce huge profits.
- A poorly redacted legal filing from PlayStation executive Jim Ryan shed light on the economics underlying a number of recent hit games.
- Sony’s 2022 PS4 and PS5 blockbuster Horizon Forbidden West cost $212 million to develop over a five-year period, and its 2020 hit The Last Of Us Part II cost around $220 million to make, with around 200 employees working on the game.
- Wedbush analyst Michael Pachter pegs Sony’s profit on each of those titles at close to $300 million.
- Sony had publicly touted huge unit sales for both games: 8.4 million for Horizon as of May, 10 million for Last of Us Part II as of last year.
3. Initially wary of Roblox over child safety concerns, Sony execs have warmed to the idea of having it on PlayStation and talks between the two companies have been ongoing.
- "We have been conservative for too long, and now we are currently engaging with people at Roblox," PlayStation executive Jim Ryan said in an exhibit introduced at the trial. "We hope that the situation will change.”
What's next: The judge didn't rule immediately but said a decision wouldn't take two or three months.
