Loss, Compensations, and Future Strategies.
We all get why Sony didn't want the deal to go through, you don't want you're biggest competitor to buy one of, if not the, biggest 3rd party game developer and publisher but why did Sony put so much focus on Call of Duty? What are the effects of Sony 'losing' Call of Duty now that the deal is as good as done? And how could they compensate for this loss?
In what is looking to be the first of at least 2 posts (the other being 'Beyond Call of Duty: Subscriptions & Cloud Gaming') that stem from an article I wrote about the ramifications of this deal, that ended up becoming way too long and drawn out for its own good, I do my best to answer these questions.
So, without further ado, let's dive right in.
The importance of Call of Duty
That Call of Duty (COD) is of great importance to Sony isn´t too hard to understand. I mean, how could having the exclusive marketing rights to the fourth best-selling video game franchise of all time not be a big deal? However, there is more to it.
There is quite a chunk of people that basically only play COD. Having the PS4/5 exclusively shown next to it in the ads will naturally lead to the general audience associating PlayStation with COD. Buy those consoles to play the game on. Add in the commission Sony gets from every COD game sold and every microtransaction made and you have quite a lot of money flowing your way. We knew all of this already but what we didn't/couldn't know was the actual hard numbers.
Well, thanks to some very poor redaction work on documents the FTC issued from Sony during the whole shebang we've learned things Sony never meant to giveaway. How much money Sony made on COD included.
One document highlighted the engagement of Call of Duty players on PlayStation. It appears to read:
“In 2021, over [14?] million users (by device) spent 30 percent or more of their time playing Call of Duty, over 6 million users spent more than 70% of their time on Call of Duty, and about 1 million users spent 100% of their gaming time on Call of Duty."
In other words that "quite a chunk of people" was around and about 1 million people in 2021. It has also been said that most casual gamers only buy 2, maybe 3, games a year. I think that statistic is a good match for those 6 million users with 70% COD time. Lastly, 14 million users spent around a third of their PlayStation playtime on COD. That's around 21 million players (assuming I read the stats right) AKA consoles that Sony stands to lose. Do you know what the profits are from these 20+ million players? 1 Billion US dollars. Youzha! That will sting.
And it will sting even more once you realize how much Sony counts on that 1 Billion dollars. What has also become known thanks to the FTC court case is the budget of two high-profile 1st-party Sony titles. We've known that game budgets have ballooned to a jaw-dropping level, something I might very well write about in the near future, and now we have a number to put to some AAA titles. The Last of Us Part 2 and, my personal favourite PS5 title, Horizon Forbidden West both took around 220 Million dollars to make. For comparison, The Witcher III (2015), cost around 81 Million dollars.
Large production costs mean that these games have to sell a lot, and I truly mean a lot, of copies to become profitable. I have fretted in the past over the profitability of games like Horizon Forbidden West and Sony probably never will confirm how much the game made but analysts estimate that Horizon Forbidden West and The Last of Us Part II made over 300 million dollars in profit. If these rough estimates are anything to go by these games are nice and profitable, even with the high production cost.
Regardless of what the actual profits of these title are, these high budgets bring monetary risks that Sony will want to minimize. It´s clear that they´ve been working on doing this by building new revenue streams. Sony has been releasing some of their big first-party games on PC for a few years after their console release. God of War, Horizon Zero Dawn, Uncharted 4 and, just recently, Ratchet & Clank: Rift Apart are all now on PC through stream. A 2nd lease for these titles, another way for them to make money, and a way to bring these titles to new players.
They´ve also been investing in live services titles. Aside from Destiny 2 through their purchase of Bungie they currently have 12 live service titles in production. Right now we know of the Last of Us Factions, the Horizon MMO, Bungie´s Marathon reboot, Fairgame$, Helldivers 2, and Concord. If these, or any of their live-service efforts, will find an audience is something we'll have to see (I have my doubts) but with how profitable these types of games can become, if they hit it big, that could make up for the lost COD money.
Damage control
When it became clear that the US government would not block the deal Sony finally signed that 10-year COD deal it had been offered by Microsoft. They'll still lose that lucrative marketing deal and now they have to pay their number 1 competitor but it's better than nothing. Enough to satisfy all those COD players that already invested in a PS5.
Even then, there's another problem coming up for Sony in the future. COD is on a yearly release schedule. It's one of the reasons the series is so big and profitable. That big group of people lining up to buy that new entry every single year like they've done for years. The problem for Sony is COD on the PS6.
To properly develop a game for a console you need development kits and other relevant information about the console. To get COD on PS6 that first year or two, with how long and demanding current development cycles are (Activision-Blizzard has put nearly all of its studios to work as part of the COD machine) Sony would need to give Microsoft all of this sensitive information about their next big machine. Information Microsoft could very easily use against them. The risk that they misuse that information is just too high to give it to them which is why Sony has stated they won´t share that information.
The 'best' solution here I see is to make the PS6 backwards compatible so that the console can play the PS5 version of the newest COD game. In that scenario, Sony is at a disadvantage against Xbox and their spiffy next-gen COD version but at least the new COD is playable on the PS6.
Killzone or Battlefield?
This all brings us to an interesting avenue. The possibility of Sony building their own COD competitor. Microsoft stated to the FTC that they consider 10 years to be sufficient time for Sony to develop a COD alternative. They themselves have disputed this, of course, to try and convince the government to block, so there's no trustworthy info from Sony itself on if they think they can build a worthy competitor in that time. All I know is that it would be difficult with the current development length and costs.
The possibility of Sony bringing back their Killzone series has been floated. Developed by Guerilla, the Dutch developer behind the Horizon series, Killzone is a futuristic 1st-person shooter that ran between 2004 and 2013 for a total of 6 titles between the PS3, PS4, PSP and PS Vita.
The last title, Killzone: Shadow Fall was a PS4 launch title. The game reviewed and sold well but PlayStation has not done anything with the series since. In part, this is because of Guerilla moving on to the Horizon series, which they are fully committed to at this point, but why Sony simply hasn't handed the series over to a new developer nobody knows. Perhaps because they didn't think it would wing back the investment with the rising development costs?
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| Key art from Killzone Shadowfall so you can get a better idea of the style, the atmosphere, of the series. |
Then there is the question of which studio they would tap to make the new Killzone. As far as I'm aware all Sony's studios are quite busy with, well, whatever they're doing. One of them could already be working on something Killzone or something like it but, for the sake of conversation, let's assume they're not. That means that Sony would either need to form a new studio, hire a studio to do the work for them or acquire a studio. They could certainly do the latter, though I don't think they will.
Sony has been acquiring some studios these last few years, some even for reasons similar to what I'm proposing here. Getting Destiny and its live-service revenue was nice but the real reason they acquired Bungie was for their expertise in live-service titles, a market Sony wants to get into as it can become a big revenue stream for them. Firesprite and Haven were similarly acquired for their experience with VR and their work on cloud technology respectively.
So yes, it's an option, but not a likely one in my mind. That suggested 13 Billion Dollar acquisition budget is not just for PlayStation but for the entirety of Sony. They might simply not have the dough for a studio of the calibre necessary for a Killzone undertaking next to other acquisitions the company wants to make in other fields. If it is even smart to acquire another studio is a whole different question. PlayStation has grown quite a lot in recent years and there is a thing as growing too fast. Embracer's current trouble is proof of that and perhaps even Sony pulling out of some game deals themselves. Well, allegedly.
Whatever the reason I'd reckon they are reevaluating the series right now. They'd have to find that new developer for the series and, well, start a 3-4 year development cycle (at least) to get a new Killzone title out. Half of those afforded 10 year period. Even so, it's better than starting from complete scratch. The series is known to people, has a groundwork ready, and can leverage the older titles. Trickle them out on PS Plus to refamiliarise the series to the people who played them a decade ago as well as introduce the series to new players. They could even choose to create a native PS5 version of Killzone Shadow Fall to test the waters in a more low-risk fashion.
Another idea that I've not seen much of but I feel is a good bet, at least in the short term, is Sony striking a deal with COD's current rival. EA's Battlefield series. The Battlefield games have done well with 88.7 million units sold as of August 2021, a number you can't scoff at but it pales in the face of the 400 million units Call of Duty had sold back then.
From EA's perspective, Sony losing COD is an opportunity. If they could strike the same deal for Battlefield Sony had for COD, and have all of that marketing might behind it, that could really push the series to new heights. It's not a yearly series like COD but each title is supported for a year or 3 so with enough of a marketing push and support from Sony they can keep each title relevant in the face of COD.
If I were Sony, which I'm not obviously, I take a good, long, hard look at both options.
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Xbox's ownership of Call of Duty through its acquisition of Activision Blizzard will be a game changer for Sony. Even if they don't fully lose Call of Duty, the marketing deal they had in place for it was a very strong console pusher and the revenue the IP generated was nothing to scoff at. This loss will be felt and put PlayStation in a more shaky position.
All that revenue was a good part of what Sony could, and likely did, use to pay the expensive bill that has become game development and could serve as a nice safety net if a title missed its financial mark or for any other setback. While they have been working on creating new revenue streams through the PC market and live services these initiatives are still in their infancy.
Sony has to look good and hard at how to compensate for the loss of Call of Duty, perhaps by reviving Killzone or by striking a deal with EA's Battlefield, and by keep working on those new revenue streams so they can keep on funding games and have a comfortable reserve for emergencies. However they go about it, they better decide fast so they have something standing once that 10-year deal expires.
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