Sony shares nosedive after Microsoft's deal with competitor Activision-Blizzard

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Sony lost $20 billion in valuation on Wednesday as shares of the Japanese entertainment conglomerate fell by more than 12%. AFP via Getty Images

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Sony’s stock on Wednesday suffered its biggest one-day fall since the global financial crisis of 2008 as the Japanese conglomerate reeled from Microsoft’s planned acquisition of gaming giant — and Sony competitor — Activision-Blizzard.

Shares of Sony were 12.8% lower by the end of trading in Tokyo on Wednesday as investors feared the deal could mean Microsoft will remove some popular games from Sony’s PlayStation consoles and offer them exclusively on its Xbox platform.

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The steep drop on Wednesday wiped $20 billion from of Sony’s market capitalization.

Microsoft and Sony have faced off for decades in the gaming console wars. Through its acquisition of Activision-Blizzard, Microsoft could add popular titles like Call of Duty, Candy Crush and World of Warcraft to its library.

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Console makers like to make games created by their own in-house studios. Currently, games like Call of Duty are currently available on both Playstation and Xbox, though that could change with Tuesday’s blockbuster deal.

The acquisition could also prove to be a boon for Microsoft’s Game Pass, the monthly subscription service that lets users access games across several devices.

activision blizzard, gaming, microsoft, sony, video games

Investors reacted to the news that Microsoft would be acquiring gaming studio Activision-Blizzard for more than $70 billion.

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There are an estimated 400 million monthly active users who play Activision-Blizzard games.

If the deal is approved, Microsoft would become the world’s third-largest gaming company behind Tencent and Sony.

The Microsoft-Activision deal has been approved by the boards of directors of both companies and is expected to close in 2023, the firms said. If the deal doesn’t go through, Microsoft will pay Activision a “break-up fee” of $3 billion, according to Wedbush Securities managing director Dan Ives.

The deal has spurred speculation in Japan that Sony would seek to acquire smaller competitors. Shares in Square Enix and Capcom rose more than 3.5% while Nintendo and Konami also saw gains exceeding 2%. All of those firms have been mentioned as possible acquisition targets for Sony.

Last year, Sony acquired several smaller gaming studios including Valkyrie Entertainment, creator of the popular God of War brand.

Analysts expect the company to consider acquisitions of its own.

“Sony can of course fight back: they still have their own top in-house studios spread around the world, PlayStation remains a powerful brand in gaming, and acquisitions are in the cards for Sony as well,” Serkan Toto, a Japan-based consultant for gaming companies,” told CNBC.

“I think the market has totally overreacted in Japan today.”

activision blizzard, gaming, microsoft, sony, video games

With its acquisition of Activision-Blizzard, Microsoft could put high-demand games like Call of Duty exclusively on its Xbox consoles, dealing a blow to competitor Sony and its Playstation systems.

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Sony’s stock reached $124 per share earlier this month — the highest in more than two decades.

This past fall, Sony reported a 27% increase in sales in its gaming division for the three-month fiscal quarter that ended on Sept. 30. The firm credited the popularity of the PS5.

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