Why Sony’s Bungie Buy Is a Cautious but Necessary Move

Why Sony’s Bungie Buy Is Cautious
Photo illustration VIP+; Destiny: Courtesy Bungie

Just two weeks after Microsoft announced its plan to purchase video game publishing group Activision Blizzard at a whopping $69 billion, Sony stoked the M&A fires Monday by revealing its intent to acquire “Destiny” studio Bungie for $3.6 billion.

It’s easy to see the irony here. While “Destiny 2” is what Bungie is currently known for, the studio was the original developer of the “Halo” series, whose first game released alongside the launch of the original Xbox console in 2001 and quickly became the brand’s biggest franchise.

Furthermore, Bungie entered a publishing deal with Activision in 2010 for “Destiny” after selling the “Halo” IP to Xbox but then terminated the deal in 2019, beginning a new era for Bungie and “Destiny 2” where it sought to build itself into a bigger company as entities like Epic Games saw the lion’s share of live-service revenue from games like “Fortnite.”

That said, buying Bungie is not exactly a “gotcha!” move by Sony against Microsoft — at $3.6 billion, how could it be?

Still, it doesn’t mean it isn’t a vital strategic move for PlayStation.

With two prominent publishing buys at Microsoft and a huge move on Zynga from Take-Two Interactive, there was certainly speculation that Sony Interactive Entertainment (SIE) would seek to acquire an established publisher like Square Enix or Capcom. But such a move would have been a significant deviation from its preexisting M&A strategy.

SIE has primarily stuck to absorbing prominent studios after fostering lucrative second-party partnerships with them. This was the case with recent acquisitions like Bluepoint Games (“Demon’s Souls” remake), Housemarque (“Returnal”) and especially Insomniac Games, which was known for exclusive PlayStation series “Resistance” and “Ratchet & Clank” before 2018’s “Marvel’s Spider-Man" released to critical acclaim and vast sales, leading SIE to finally bring the studio into the fold.

Bungie has yet to release anything on its own post-”Halo” other than continued updates and expansions to “Destiny 2.” While it never partnered with SIE in a second-party capacity prior to the impending acquisition, this isn’t comparable to the moves Microsoft or Take-Two has made.

PlayStation has been Sony’s lifeline amid the pandemic, as its film and music businesses have had to contend with the ramifications of lockdowns that turned theatrical films and concerts into complicated affairs. By contrast, Microsoft’s cloud business was exactly the kind of unit meant to excel in a virtual age exacerbated by the pandemic, affording the company deeper pockets to experiment with Xbox than Sony has with PlayStation, even if PS5 sells better than the Xbox Series consoles.

Rather than a knee-jerk reaction to the Activision Blizzard news, Sony’s move on Bungie is reportedly several months in the making and was driven by SIE’s desire push into live-service gaming, an area it’s had no real first- or second-party involvement in.

SIE in 2021 did partner with Firewalk Studios, a team coincidentally comprised of ex-Bungie developers, to make a yet-to-be-announced original multiplayer IP that will help PlayStation expand into live-service gaming. Such titles rely on in-game purchases for revenue in tandem with individual game sales or entirely without if they’re free-to-play games.

In-game purchases accounted for less than a third of Sony’s entire gaming operation in Q3 2021; at big publishers like Activision Blizzard or Electronic Arts, they often exceed well over 50%. Sony is also working to improve its subscription strategy with Spartacus, the company’s answer to the very successful Xbox Game Pass, which now has 25 million subscribers — far more than PlayStation Now, which was last pinned at $3.2 million.

Sony can’t ignore the value Game Pass offers to Xbox players, which grants them access to more than 100 games for monthly tiered prices, the highest of which comes with cloud gaming on multiple devices. But the success of Game Pass has naturally come at the expense of game sales, with Microsoft having previously noted reductions in unit sales for third-party titles. It’s been an acceptable loss for Microsoft to bear as a major big tech player but is bound to be a tougher model for SIE to adapt to with Spartacus, making it a priority to boost its other revenue streams.

As a live service, “Destiny 2” is a sure bet to increase in-game sales for SIE that will avoid putting all the pressure on new unreleased IP. Its frequent updates have kept the game surging in popularity through 2021 despite releasing back in 2017, and its next big expansion, “The Witch Queen” is due February 22.

It’s also important to remember that Bungie’s long-term plan following the Activision split was to create multimedia franchises beyond the “Destiny” brand — as a Sony subsidiary, this should become substantially easier as Sony is already bringing properties like “Uncharted” and “The Last of Us” to the big and small screens, respectively. In addition, SIE and Bungie’s messaging indicates firm intent to keep “Destiny 2” as is with respect to its multiplatform presence and overall roadmap, rather than turn it into exclusive IP.

It’s a major move for sure, but Sony isn’t getting hysterical about Xbox just yet.