Sony Tanks in Wake of Microsoft-Activision Deal

Sony (NYSE:SONY) shares fell hard in New York on Wednesday after Microsoft (NASDAQ:MSFT) announced plans to buy Activision Blizzard (NASDAQ:ATVI).

Investors likely fear rising competition to Sony’s PlayStation division as well as the potential for Microsoft to pull some popular games from the Japanese entertainment giant’s platforms.

For some time, Sony has been ahead of Microsoft with its portfolio of first-party games, allowing it to stay ahead in the console wars. But should Microsoft close the acquisition of Activision, it will have a strong portfolio of hit games from the Call of Duty franchise to World of Warcraft.

That content can help power Microsoft’s subscription strategy around Game Pass, a pay-monthly service that allows users to access a library of games across different devices. It is a rival to Sony’s "PlayStation Plus" and "PlayStation Now" services.

When console makers own the gaming studio, they often make those games exclusive to their platforms. Games like Call of Duty are currently available on both PlayStation and Xbox.

But investors fear Microsoft could take those games off of PlayStation’s platforms, giving the U.S. company more attractive content to rival Sony

Sony has been investing heavily in first-party exclusive content for some years which has allowed it to bring exclusive hit games such as Spider-Man and The Last of Us to the PlayStation.

Meanwhile, it has been investing in virtual reality and this month took the wraps off its second-generation headset called the PlayStation VR2.

SONY shares retreated $4.58, or 4%, to $111.27