FTC Opens Inquiry Into Sony’s $3.6 Billion Bungie Gaming Purchase
The Federal Trade Commission has opened an in-depth investigation of Sony’s proposed $3.6 billion takeover of Bungie, the gaming studio behind Destiny and Halo, according to people familiar with the matter. While the FTC may not be able to block the deal, its decision to review it is the latest example of how aggressive the agency is becoming in reviewing mergers.
The Bungie deal was announced at the end of January, and was part of a broader consolidation underway in the gaming industry. Two weeks earlier Microsoft had announced its blockbuster $69 billion billion purchase of Activision Blizzard. The FTC is also reviewing that transaction.
THE TAKEAWAY
• Investigation opened end of April
• Focus is on Sony’s incentive to withhold Bungie titles including Destiny
• Follows investigation intoMicrosoft’s $69 billion Activision purchase
The FTC last week sought additional information about the deal from Sony and Bungie, the people said. The FTC investigation could delay closing by six months or more, potentially pushing it into early 2023.
Both the Activision and Bungie deals were struck as the gaming industry started moving toward a subscription model, which would make exclusive games important for bringing in new subscribers. Microsoft, for example, has launched a subscription service called Xbox Game Pass while Sony plans to launch a similar offering for the Playstation. While neither Microsoft nor Sony have indicated any plans to use their proposed games to increase the number of exclusive games on their subscription services, the FTC may be concerned the gaming market will eventually move in that direction. Video-streaming services, for example, now emphasize exclusive programming.
In the inquiry, the FTC is at the moment focused primarily on whether Sony would have the incentive to hinder or completely withhold access to Bungie games from companies that offer competing consoles and services, including Microsoft’s Xbox. Agency lawyers are looking to determine whether players consider Bungie titles such as the popular first-person shooter franchise Destiny must-haves, and whether restricting access to such games would harm rival companies. Sony is a powerful player in gaming: Industry analyst Ampere Analysis estimates that Sony held 46% of the global game console market in 2021, maintaining a significant lead over Microsoft and Nintendo.
Sony has pledged to keep Bungie games available across multiple platforms. Next month, Sony plans to launch a new subscription service that will grant access to hundreds of PlayStation games but will not include the company’s most recent releases. Microsoft, by contrast, began making its newest games available at launch on its subscription service in 2018.
An FTC spokesperson declined to comment. Spokespeople for Sony and Bungie did not immediately respond for comment.
The FTC is examining the same game exclusivity issue as part of its Microsoft-Activision review. Microsoft has committed to make Activision titles available on competing consoles, including Sony’s PlayStation, but it’s less clear whether Microsoft will allow Call of Duty and other titles to be part of subscription services other than its own, such as Sony’s. Microsoft so far has not indicated its plans; two of the people familiar with the deal said the company has not decided, but the subject is expected to become a topic of negotiations between the companies and the regulator.
The FTC’s review of the Activision deal also encompasses the combined companies’ access to consumer data, as well as the labor market for game developers, The Information previously reported. It couldn’t be learned whether the FTC is investigating similar issues in the Sony deal.
The FTC’s Mergers II team, which focuses on deals involving hardware, software and entertainment companies, is conducting both merger reviews.
The decision to open an investigation of the Bungie acquisition is yet another sign that FTC Chair Lina Khan is looking closely at mergers in the technology sector. Still, while the bar to opening a probe is virtually nonexistent, it’s an entirely different matter to convince a federal judge to block a deal.
Both the FTC and the Department of Justice are currently working on a new policy for reviewing deals that could potentially make the process more difficult for companies but it would not have the force of law. And while several bills introduced in Congress in the past year would in some instances outright ban many large deals, there is little chance they will be signed into law anytime soon.