FTC seeking to block Microsoft-Activision deal "Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.
NEW RELEASES: This week's big new release is Square Enix's (SQNXF) "Crisis Core: Final Fantasy VII Reunion," a spinoff of "Final Fantasy VII that released December 13 for Switch (NTDOY), PlayStation 4 (SONY), PS5, Xbox One (MSFT), PC, and Xbox Series X/S. Also out this week is CD Projekt's (OTGLY) "The Witcher 3: Wild Hunt - Complete Edition," a next-generation remaster of the 2015 game of the same name. The title releases December 14 for PlayStation 5 and Xbox Series X/S.
FTC/MICROSOFT: Last Thursday, the Federal Trade Commission announced it is seeking to block Microsoft from acquiring Activision Blizzard (ATVI), alleging that the deal "would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business." In a complaint on the matter, the FTC pointed to Microsoft's "record of acquiring and using valuable gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer)." Microsoft "decided to make several of Bethesda's titles including Starfield and Redfall Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles," the agency said in a press release. The Commission vote to issue the complaint was 3-1, with Commissioner Christine Wilson voting no.
In response to the news, Microsoft president Brad Smith said via Twitter that the company has "have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court... We continue to believe that our deal to acquire Activision Blizzard will expand competition and create more opportunities for gamers and game developers." Meanwhile, Activision Blizzard CEO Bobby Kotick told employees in a letter that the "allegation that this deal is anti-competitive doesn't align with the facts, and we believe we'll win this challenge."
Less than a week after the FTC announced its action, Bloomberg reported that Microsoft has offered Sony the right to include "Call of Duty" games as part of PlayStation's gaming subscription service. The Xbox maker has publicly stated that it offered the PlayStation maker a 10-year pact to make the Activision hit shooter available on PlayStation consoles, according to Bloomberg's Leah Nylen and Dina Bass. While Sony has not accepted such a proposal, the offer includes rights to sell games in the series on PlayStation Plus, which gives subscribers access to a catalog of games for a monthly fee, the authors noted, citing a person familiar with the negotiations.
TAKE-TWO/CITI: On Friday, Citi analyst Jason Bazinet initiated coverage of Take-Two (TTWO) with a Neutral rating and $105 price target. Take-Two bought the right asset in Zynga but at the wrong time as mobile gaming revenues began to weaken just after the transaction closed, Bazinet tells investors in a research note. While estimates for fiscal 2023 and 2024 have fallen, they have not fallen enough, said the analyst. Bazinet's 2024 bookings estimates are 10% below the Street, primarily due to expectations of further weakness within the Zynga studio.
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