Sony's market value falls by US$20 billion after Microsoft's acquisition announcement

Bloomberg has reported that the market value of Sony dropped by a staggering 13 percent or US$20 billion on January 19 after Microsoft revealed its planned acquisition of Activision Blizzard for US$69 billion. This marks the largest fall in Sony’s market value since October 2008.

The landmark deal is Microsoft’s attempt to bolster its position to compete in the gaming market by procuring major titles such as Call of Duty, Warcraft and Overwatch. This strategy follows Microsoft’s acquisition of ZeniMax for US$7.5 billion. Ultimately, Microsoft desires to add as many popular IPs as possible to its Xbox Game Pass service to entice gamers, which contrasts with Sony’s model of providing sought-after exclusive games such as Spider-Man and Uncharted to sell systems and drive its gaming division.

These multibillion-dollar transactions show that Microsoft means business, and this recent deal has stirred the industry, seemingly causing Sony's shares to plummet. This is not surprising given that gaming accounts for 30% of Sony's profits.

Sony has managed to outsell Xbox in system and game sales in the years since the release of the PS4. In response, Microsoft is willing to spend unfathomable sums of money to catch up with Sony and thus, Sony is beginning to feel the pressure. According to Kazunori, a Morningstar Research Analyst, investors are anxious that Sony will face challenges ‘if indeed the industry shifts away from the hardware-based model’.

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