Sony’s Billion-Dollar Epic Games Investment Is Safe but Smart Play

Sony’s Billion-Dollar Epic Games Investment Is
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With the specter of Microsoft’s behemoth $69 billion pending purchase of Activision Blizzard still hanging over 2022, all eyes have zeroed in on the kind of move Sony could make in response.

But rather than jump on the bandwagon of acquiring a big publisher, Sony is continuing to address and improve upon PlayStation’s weak spots by currently revamping its subscription offerings to better compete against Xbox Game Pass, bringing more games to PC and getting dead serious about expanding its push into live services, having just invested $1 billion into “Fortnite” parent Epic Games.

Announced last week alongside another billion-dollar investment in Epic from Lego parent company KIRKBI, Sony’s investment is a big increase from the $250 million it spent to acquire a 1.4% stake in Epic back in 2020.

It’s also significant in that Sony is already spending $3.6 billion to acquire developer and former Microsoft studio Bungie, which has been self-publishing its hit live-service shooter “Destiny 2” after terminating the game’s publishing deal with Activision in 2019.

Despite Bungie’s earlier history with Microsoft, Sony’s move to acquire the studio was reportedly well in the works before Microsoft pounced on Activision. All in all, the Bungie deal is far more reminiscent of Microsoft’s $2.5 billion purchase of “Minecraft” studio Mojang in 2014, which enabled the tech leader to preside over what was then and still is a highly popular live-service gaming platform.

Fostering a bigger relationship with Epic than ever before, as Epic and Lego partner on a new metaverse experience targeting children, further highlights how Sony is seeking to mirror Microsoft’s success with “Minecraft” given how much it mirrors the Lego ethos of players building and sharing environments with one another, albeit in a digital space.

The game and network services segment at Sony currently sees its highest source of revenue come from “add-on content,” aka in-game spending, the bread and butter of any live service in the gaming space.  

As hardware sales from the new PlayStation 5 console eventually wane, Sony is clearly aiming to strengthen in-game spending more than ever through a combination of such purchases across “Destiny 2,” whatever transpires from Epic and Lego’s collaboration and new first-party live services that will come from the PlayStation Studios family.

Sony is still pulling in more overall gaming revenue than Microsoft, but that could easily change with the expected close of Microsoft’s Activision acquisition next year. Fortifying its gaming segment with more robust and widespread live services is the smart move here, rather than hastily try to match such an extreme M&A deal as what Microsoft is managing.

After all, Microsoft and Sony are far from identical companies. Gaming has been the star segment at Sony throughout the pandemic’s ongoing strain on Sony Music and Sony Pictures, while Microsoft continues to bring in double the revenue off the back of its cloud business, which has understandably soared since COVID highlighted the need for more virtual workspaces.

This put Microsoft in a good position to continue tinkering with its gaming strategy after it first released a more popular subscription offering through Xbox Game Pass before rapidly expanding its first party studios and ultimately acquiring big publishers to get a leg up on Sony during the pandemic.

The ship hasn’t sailed on Sony going for a smaller AAA publisher, especially since it has regional neighbors in Capcom, Sega and Square Enix.

Still, reinvesting in its relationship with Epic is an assertively smart way for Sony to stay cautious and strategic while it still has time to prepare for a greater offensive against Microsoft.