Why In the World Is the FTC Trying to Block Microsoft From Buying Call of Duty?

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In 2001, Sony acquired video game studio Naughty Dog, which would go on to produce some of the most popular and critically acclaimed video games of the last two decades. The Uncharted series, which began in 2007 with Drake’s Fortune, has spawned four main games, a handful of spinoff entries, and a big budget movie staring Mark Wahlberg. The Last of Us and its 2020 sequel rank among the most acclaimed video games in history; next year, a big-budget, prestige TV adaptation of the first game will air on HBO. 

Both game franchises are and have always been what the gaming industry refers to as “console exclusives,” meaning only one line of video game consoles supports them—the Playstation, which is, like Naughty Dog, also owned by Sony. 

Nor are Naughty Dog’s games the console’s only exclusives: Popular games like Horizon Zero Dawn, God of War, Ratchet & Clank, and their spinoffs and sequels were also developed by first-party studios that make games for Playstation. (Some of these games, like Horizon Zero Dawn, can also be played on PC.)* 

Some of Sony’s first-party studios were acquired. Some were built by Sony in-house. But either way, they allow Sony to control the distribution of these highly acclaimed, incredibly popular, big-budget games, sometimes categorized as “AAA games.” The only way to play these particular AAA games on a console is to buy a Playstation. And that, in turn, provides a reason—arguably the most important—to buy Sony’s video game console. 

Indeed, Sony leadership touts first-party games from an acquired studio in earnings calls, telling investors that the company is “working to strengthen our first-party software by creating new IP and accelerating the roll-out of live game services and multi-platform titles through synergies with the studios we have acquired.” And PlayStation execs brag about these games in interviews. Last year, PlayStation head Jim Ryan was asked what makes the company’s newest console, the Playstation 5, cool, he emphasized the lineup of games and then highlighted an array of first-party exclusives. A game like Ratchet & Clank, he said, “defines what PlayStation 5 is capable of doing.” 

So it is at least a little ironic that as Microsoft, which makes the rival console Xbox, has moved to acquire Activision Blizzard, the publisher behind the Call of Duty shooter franchise, Sony has objected on the grounds that it could “[influence] users’ console choice.” 

In other words, Sony, which promotes popular video game exclusives as reasons to buy PlayStation consoles, doesn’t want Microsoft to have a popular video game exclusive that might provide a reason to buy an Xbox console. 

The argument isn’t that Microsoft shouldn’t have any exclusives at all: Xbox is famously the home to the Halo series and recently acquired ZeniMax Media, the parent company of Bethesda Softworks, the studio behind popular role-playing games franchises like the Elder Scrolls games and the forthcoming Starfield, which Microsoft has said will be exclusive to Xbox.

Rather, Sony argues that Call of Duty is different somehow—more popular, more influential, more of a cultural force, or, as Sony has described it, “an essential AAA game that has no rival.” 

And now the antitrust overseers at the Federal Trade Commission appear to share Sony’s concerns. Last week, the agency filed a complaint against Microsoft seeking to block the company’s $70 billion acquisition of Activision, warning that the merger would result in a “loss of competition” that “would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.” 

The FTC’s complaint is led by commission chair Lina Khan, an antitrust hawk who has served as the frontperson for the Biden administration’s efforts to block various mergers, especially in tech and health care, following a 2021 executive order instructing federal agencies to step up antitrust enforcement. So far, most of those cases have failed, with judges repeatedly rejecting the notion that the mergers would be anti-competitive. 

There’s little reason to think that Microsoft’s acquisition of Activision would be any different. For starters, it’s unlikely that Microsoft would even attempt to hold back Call of Duty as an Xbox exclusive in the near future: Microsoft has already moved to put Call of Duty on another console, the Nintendo Switch, for at least a decade—undercutting the FTC’s argument that the “relevant market” for antitrust enforcement consists entirely of Microsoft and Sony. 

Moreover, Microsoft has said it plans to honor current commitments for the franchise, meaning that Call of Duty will stay on PlayStation for at least three years. The company has also promised to keep Call of Duty on PlayStation for as long as the console series exists. Meanwhile, PlayStation leadership openly rejected Microsoft’s proposal to extend Call of Duty on PlayStation for an additional three years beyond the current deal—meaning it would be contractually obligated to release Call of Duty on PlayStation for six years following the acquisition—calling it “inadequate on many levels.” 

Why would Microsoft continue to release Call of Duty on a rival console? Because Microsoft would get a cut of every sale from an even larger market. Indeed, Sony should be familiar with this model: Earlier this year, Sony finalized a $3.6 billion acquisition of game studio Bungie, maker of the wildly popular online shooter franchise Destiny—in a deal that keeps Destiny games on both consoles. 

Bungie, it’s worth noting, rose to prominence as the initial developer of Microsoft’s Halo franchise. Its current big project, Destiny, is a popular online multiplayer shooter—not precisely like Call of Duty, in that it’s focused much more on cooperative gameplay, but not entirely unlike Call of Duty either, in that it’s a multiplayer shooter that is in some ways better understood as a live online service, which Sony, following the acquisition, now controls. 

Does any of this sound like a dysfunctional, uncompetitive market needing regulatory oversight? Does it seem like a market where consumers don’t have real, meaningful choices? Or does it seem more like an ordinary business dispute between two big corporations that has garnered attention from regulators because of its size and cultural relevance and because Biden has made the quixotic decision to go all-in on consistently weak antitrust cases simply to push back on corporate bigness for its own sake?

Some conservatives, meanwhile, have urged on Biden’s FTC, arguing that antitrust scrutiny of Microsoft’s acquisition is a way to push back against big tech to help win the culture war against woke corporate elites. 

That’s just funny. 

Call of Duty is among the most right-coded pop culture franchises in circulation. One of the most popular installments included quotes about the nature of man and war from Dick Cheney and Donald Rumsfeld. The 2021 entry, Black Ops Cold War, sent players on secret missions to kill communists at the direction of Ronald Reagan and was described by one critic as a “Reagan-Worshipping Right-Wing Fever Dream.”

I think it’s mostly a mistake to treat these silly, entertaining, pretend-violent games as meaningful fronts in the culture war. But if anything, Call of Duty owns the libs—and Microsoft just wants to own Call of Duty.

*UPDATE: To note that some exclusives are playable on PC, but not Xbox.

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