Role of Call of Duty in Microsoft-Activision Transaction and Why FTC Cares?

December 25, 2022 by Stefan Salvatore

Call of Duty: Michael Feist, from Vancouver, Washington, has spent about 163 hours playing Call of Duty: Modern Warfare II since its release two months ago. That’s over a week’s worth of time spent fighting digital battles on his Xbox Series X, and it’s that kind of dedication that Microsoft is banking on with its $69 billion purchase of game developer Activision Blizzard.

The 27-year-old and his brothers took time off from work to play when it was released. Feist has played Call of Duty games, one of the most popular video game series ever since he was a kid. He and his stepfather were regulars at the GameStop lines for new Call of Duty releases.

More than 425 million pieces of the 19-year-old military-themed series have been sold, bringing in over $30 billion in sales. As a result of Microsoft‘s recent and largest-ever acquisition, Activision Blizzard, the company that owns the Call of Duty franchise, is now the subject of a court struggle.

The firm green-lighted Microsoft’s approximately $69 billion buyout offer in April. In the following months, U.S. regulators criticized the merger as anticompetitive and took steps to stop it from going through. The relevant authorities are currently investigating it in the U.K. and E.U.

This deal would be one of the top 30 most significant acquisitions in terms of sheer size. It is much larger than Amazon‘s $8.5 billion purchase of MGM earlier this year and Microsoft’s $26.2 billion purchase of the professional network platform LinkedIn in 2016.

Microsoft claims to be in the video game industry alongside Sony and Nintendo but claims to be in last place. This purchase aims to give the Redmond-based computer giant an edge in the marketplace.

Microsoft claims that “three-quarters of Activision’s gamers and more than a third of its profits come from mobile products,” making this acquisition “essential” to Microsoft’s plans to expand Xbox’s footprint in mobile gaming.

The Federal Trade Commission, a newly empowered federal agency charged with preventing the formation of monopolies, was displeased by Activision’s acquisition. Microsoft’s assurances that it will make popular titles like Call of Duty available on more platforms have not influenced the FTC.

A complaint was lodged earlier this month by commissioners alleging that the transaction would have an anticompetitive effect.

The complaint alleges that if Microsoft owned Activision’s intellectual property, “it would have the capacity and enhanced motive to withhold or degrade Activision’s material in ways that substantially decrease competition,” including competition on product quality, pricing, and innovation.

Microsoft disputes that the proposed transaction would grant it monopoly power. On Friday, Xbox responded to the FTC case by saying, “Xbox and Activision are only two of hundreds of game publishers who compete by selling different sorts of games on different platforms at varying costs, ranging to $0.”

What could be the deciding factor in the court case? A “Call of Duty.” “The FTC’s action is all about… one game, Call of Duty,” Microsoft President Brad Smith said during the company’s annual shareholder meeting in December.

Since its inception in 2003, Activision has produced a new Call of Duty game year. Despite its $70 price tag, Modern Warfare II this year sold $1 billion in the first ten days after its release on October 28.

Modern Warfare 2’s story mode, cooperative mode, and multiplayer platform provide players with a first-person perspective on real-world and fictional conflicts. The creators collaborated with Pentagon experts to make the battle mechanics in Call of Duty as realistic as possible.

The multiplayer feature is the series’ main lure, allowing players to compete in tournaments as teams. Expert in the video game industry and adviser for The NPD Group, Mat Piscatella has stated that Call of Duty has been the best-selling game of its release month for a record 14 years.

Call of Duty, according to Piscatella, is the biggest game ever made. Call of Duty generates income for consoles like the Xbox and Sony’s PlayStation through physical game sales and microtransactions.

Joshua Foust, an author on the video gaming industry and consumer identities, argues that the ability to sell cosmetic upgrades, such as new “skins” for players’ guns, is a sustainable revenue stream for platforms.

According to Foust, Sony is concerned about losing this long-term cash source if Call of Duty is no longer on PlayStation, the world’s most popular gaming device. Microsoft, according to Sony, would cut PlayStation off from the game if the acquisition goes through. Representatives for Sony did not return calls seeking comment.