NSR Tech Policy Quick Take: What the FTC's review of Sony-Bungie means for Microsoft-Activision

What's new: The FTC is opening an investigation of Sony’s acquisition of the gaming company Bungie, according to a report in The Information yesterday.

The news is not unexpected. The $3.6 billion price of the acquisition is far above the threshold for required reporting of a merger to regulators. In addition, regulators are already investigating Microsoft’s much larger $68.7 billion acquisition of Activision. We wrote about how regulators will review the Microsoft-Activision merger in a previous note (LINK).

Investigating the Bungie acquisition allows the FTC to signal that it is treating two competitors — Microsoft and Sony — equitably. It also indicates the seriousness of its review of competitive dynamics in the gaming sector. Conducting both investigations in parallel may also generate market data and analysis that enhances the FTC’s understanding of the industry. Building this expertise by investigating two deals will likely assist the agency’s review of each one.

A focus of the government’s review is likely to be game exclusivity: will PlayStation and Microsoft make Bungie and Activision games available on all platforms? Bungie has emphasized that its games will not be exclusive to PlayStation, stating that “Our games will continue to be where our community is, wherever they choose to play.” PlayStation CEO Jim Ryan has echoed these assurances. Microsoft announced a similar commitment, though it has agreed only to make its “popular” games available on rival platforms.

Background: Sony announced the $3.6 billion acquisition of Bungie in late January, two weeks after Microsoft announced its acquisition of Activision

Full 12-month historical recommendation changes are available on request

Reports produced by New Street Research LLP, 18th Floor, 100 Bishopsgate, London, EC2N 4AG. Tel: +44 20 7375 9111.

New Street Research LLP is authorised and regulated in the UK by the Financial Conduct Authority and is registered in the United States with the Securities and Exchange Commission as a foreign investment adviser.

Regulatory Disclosures: This research is directed only at persons classified as Professional Clients under the rules of the Financial Conduct Authority (‘FCA’), and must not be re-distributed to Retail Clients as defined in the rules of the FCA.

This research is for our clients only. It is based on current public information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Most of our reports are published at irregular intervals as appropriate in the analyst's judgment. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.

All our research reports are disseminated and available to all clients simultaneously through electronic publication to our website.

New Street Research LLC is neither a registered investment advisor nor a broker/dealer. Subscribers and/or readers are advised that the information contained in this report is not to be construed or relied upon as investment, tax planning, accounting and/or legal advice, nor is it to be construed in any way as a recommendation to buy or sell any security or any other form of investment. All opinions, analyses and information contained herein is based upon sources believed to be reliable and is written in good faith, but no representation or warranty of any kind, express or implied, is made herein concerning any investment, tax, accounting and/or legal matter or the accuracy, completeness, correctness, timeliness and/or appropriateness of any of the information contained herein. Subscribers and/or readers are further advised that the Company does not necessarily update the information and/or opinions set forth in this and/or any subsequent version of this report. Readers are urged to consult with their own independent professional advisors with respect to any matter herein. All information contained herein and/or this website should be independently verified.

All research is issued under the regulatory oversight of New Street Research LLP.

Copyright © New Street Research LLP

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of New Street Research LLP.