According to regulators, Sony offers Activision preferential treatment because of Call of Duty’s relevance in the PlayStation ecosystem and current marketing arrangements.
Call of Duty continues to be the most difficult obstacle that Microsoft and Activision face in completing their merger. Call of Duty’s impact on the PlayStation and Xbox industries has been exhaustively scrutinised by regulators, and the consensus opinion is that the franchise has a considerable and very tangible impact on both systems. This is especially true for Sony, which leads the console market because to its strong hardware foundation and multibillion-dollar ecosystem of products and services.
In recent files, the Competition and Markets Authority of the United Kingdom unearthed some intriguing data about Call of Duty on PlayStation. According to the CMA’s appendices and glossary for their provisional conclusions report, Sony actually offers Activision a larger revenue split for all Call of Duty game sales and earnings produced on the PlayStation platform.
Sony is said to take a “discounted margin” on Call of Duty earnings made on PlayStation, implying that Activision is not receiving the standard 70-30 split (the standard revenue sharing ratio is that game developers and publishers keep 70% of all earnings, while platform owners like Sony, Microsoft, and Nintendo take a 30% cut). The precise ratio between Activision and Sony is unknown, but this approach is not unusual in the business.
For example, Steam provides top-earning titles a larger share of revenue. If a game makes between $10 million and $50 million, Valve reduces its revenue portion (also known as royalties) to 25%.
Given the importance of Call of Duty to Sony’s annual earnings, it only makes sense for Sony to offer Activision a better agreement. According to the CMA, Call of Duty is one of PlayStation’s top three highest-earning and most-played games. We’re guessing the other two games will be something like Fortnite, which is very certain, and Apex Legends or Genshin Impact.
Even with this discounted margin, we’ve already calculated that Activision games produced more than $1.32 billion on PlayStation systems in 2021.
This is the amount kept by Activision, not the total amount produced by Activision games. It’s unclear how much of this was earned by Call of Duty, but it’s likely that a large amount of the earnings came from Call of Duty game sales and monetization.
Sony claims that if the merger goes through, it will most likely not honour the discounted margin rates because it will provide Microsoft, a close competitor, more money on an annual basis.