What Call Of Duty's record launch means for Microsoft's takeover bid

Call Of Duty (CoD) has long been a titan of the video game industry – and the latest instalment is proving the point like none before it.

This week, less than a fortnight after its release at the end of October, Modern Warfare II was confirmed to have surpassed an eye-popping $1bn in sales worldwide – a record 10 days for the near-20-year-old franchise.

But while Modern Warfare II was always likely to be a grand success, the sheer scale of its earnings come at an interesting time given Microsoft’s bid to buy the company behind it for a record-breaking $68.7bn.

What stands to be the biggest ever takeover in the tech industry has drawn plenty of attention from the world’s acquisitions regulators, with the UK and US watchdogs both putting it under the microscope.

And in the week Modern Warfare II’s historic success was trumpeted by publisher Activision, the EU joined in by launching its own investigation.

What are the regulators investigating?

The UK, US and EU regulators are all essentially looking into the same thing, and that’s whether Microsoft owning Activision – and, by extension, games like CoD – would give it an unfair advantage over its rivals.

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The European Commission said this week: “The point is to ensure that the gaming ecosystem remains vibrant to the benefit of users in a sector that is evolving at a fast pace. We must ensure that opportunities remain for future and existing distributors of PC and console video games, as well as for rival suppliers of PC operating systems.”

The chief opponent to the deal is Sony, which makes the PlayStation. It’s concerned CoD may become exclusive to Microsoft’s Xbox platform, and has made regulators well aware of its case.

CoD is a big deal for Sony – for example, Modern Warfare II was the best-selling game in the UK in October (despite launching with only three days left) and 57% of sales were on PlayStation.

How has Microsoft responded?

Microsoft has promised to keep CoD on PlayStation “for at least several more years” beyond its current contract.

“Sony, as the industry leader, says it is worried about CoD, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation,” it said after the EU’s announcement.

But Sony appears sceptical long-term – and the idea of a console maker like Microsoft releasing games on other systems is rare. Its $7.5bn takeover of Bethesda will see the popular Elder Scrolls series kept off PlayStation, becoming a big draw for its Netflix-style subscription service Xbox Game Pass.

Games industry analyst Michael Pachter, of Wedbush Securities, told Sky News that CoD really is different – and the enormous demand for Modern Warfare II proves it.

“The purchase price makes no sense if Microsoft planned to make CoD an Xbox exclusive,” he said.

“Had it done so, CoD annual sales would drop by as much as 50%.”

What happens next?

News of another media takeover having the rug pulled out from it this month had some wondering if the same may befall Microsoft. Penguin Random House had been looking to buy Simon & Schuster for $2.18bn (£1.9bn), but two years after its announcement it was scrapped by a US judge on competition grounds.

Mr Pachter does not expect the same to befall Microsoft, but an olive branch – in the form of a legally binding agreement to not let CoD go the way of Elder Scrolls – may be required.

“Microsoft anticipated that this would form the basis for regulatory review, and preemptively committed to making Activision games available for other consoles after the merger is completed,” he told Sky News.

“This commitment is not legally binding, so it is prudent for the regulators to insist that it become binding. The regulators’ comments are positioning them to claim victory when they secure a legally binding commitment from Microsoft to continue to support PlayStation and other consoles.”

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