Activision Blizzard King’s Bobby Kotick has made some interesting statements about the video game industry in general, in relation to how regulators are trying to understand the issues surrounding their deal with Microsoft.
So far, the prevailing argument against the acquisition has remained Call of Duty. Sony has been claiming that the game has such an outsized effect on the business that it would harm competition between the game companies if the deal were to push through. Microsoft has so far not indicated they are willing to let the one game go from the deal, because they also want to use the Call of Duty IP in their future mobile games plans with Activision.
But in this interview in CNBC show Squawkbox, Bobby argues that the FTC, European Commission, and CMA still don’t really understand the state of the industry. For the sake of clarity, we will summarize his points, and you can watch the video below.
Bobby starts by talking about how the video game industry went through a massive shift in the last ten years. That shift has been from video games being played in expensive consoles, for middle class markets, in developed countries, to being played on phones, increasing the reach of these games across what were previously unprofitable regions and markets. Apple and Android are now the biggest platform for games, and what industry heads are looking for, is how much premium content these new gamers will play, in these free games.
When asked about the regulators seeing exclusively the console side of the game industry, Bobby plainly says that the FTC, CMA and EU “don’t know our industry.” He acknowledges their efforts to rapidly understand it, but they don’t understand that it is (primarily) a free-to-play business now.
He then makes the point that the biggest players in the market are not Western companies, like Microsoft and Activision Blizzard King. They are the Japanese and Chinese companies.
He names Sony and Nintendo, but not as console manufacturers. Rather, Bobby points out that both companies have huge libraries of IP, beyond gaming. He cites Sony having characters going back 80 years. To be clear, he doesn’t mean the PlayStation brand, but Sony Studios, which includes the Columbia Pictures library that does go back that long. He says Nintendo has the ‘very best characters in video games.’
He then also calls Chinese companies Tencent and Bytedance as the best companies in the world today. Tencent has dipped its toes in many industries, and has multiple deals with many top gaming companies to work in China. Bytedance does not make video games at all, and is primarily known worldwide as the developer behind Tiktok.
Bobby refers to both Japan and China as ‘protected markets’. As you may already know, Western companies like Activision Blizzard King can’t enter China without a local Chinese based company to partner with. You can read about the acrimonious end of Activision Blizzard King’s relationship with former partner company NetEase here.
Bobby also says they have struggled to enter the Japanese market. Japan does not have regulations as strict as China. However, the country’s inward looking culture has made it difficult for many foreign brands and products to gain mainstream acceptance and popularity, the opposite of China’s freewheeling acceptance of Western culture.
Activision Blizzard King has achieved some success in entering Japan, with games like Call of Duty pulling decent sales for a Western based property. Still, the competition against Japan’s own games has usually left Western developers struggling to catch up.
Bobby knew very well what he was doing when name dropping these countries. While gamers see Activision Blizzard King as a bloated behemoth filled with IPs, and employing hundreds around the world, Bobby is pointing to companies that are even bigger than they are, in many different ways.
It’s very telling about which companies Bobby thinks are the major industry players, that Activision Blizzard King works around with and have to adjust to. With a a perspective like this, merging with Microsoft is a strong defensive move, that will give their own IP a better fighting chance against so much competition.
You can watch the CNBC interview below.