Why Microsoft’s $75 Billion Bid for Activision Blizzard Hinges on Call of Duty

The videogame franchise, arguably the most successful ever, is at the center of the debate over whether Microsoft’s planned $75 billion acquisition of Call of Duty ownerActivision Blizzard could give it an unfair edge to dominate the videogaming industry.

The U.K.’s Competition and Markets Authority mentioned Call of Duty 41 times in the 20-page summary of its decision to reject the deal last month. The U.S. Federal Trade Commission cited the game 18 times in its 23-page complaint to quash the deal in December. The European Union approved the deal this month but only after Microsoft pledged to allow competitors to stream Call of Duty and other Activision games over the cloud.

Regulators’ fixation with the franchise isn’t only about its immense and lasting popularity but also whether it could give Microsoft an unfair advantage in cloud gaming, a new and more affordable way of accessing games, if it were to decide in the future to withhold the series from rivals.

Call of Duty’s “loyal fanbase and enduring appeal have made it particularly valuable, influencing gamer engagement and gaming product adoption," the FTC said in its complaint.

The companies say the deal won’t hurt competition and that they have committed to licensing Call of Duty games to rivals and to enabling people to stream current and future Activision titles through the cloud-gaming platform of their choice.

Two-decades-old Call of Duty is one of the most successful entertainment properties ever, with over $30 billion in lifetime revenue, more than any other shooter series and many movie franchises. Call of Duty’s annual installments have ranked No. 1 in U.S. videogame franchise sales for the past 14 years in a row, according to research firm Circana.

Microsoft wants to buy Activision to add the developer’s blockbuster games to its subscription service called Xbox Game Pass, which offers cloud gaming, the Netflix-like streaming of games, and what some executives and analysts say will drive growth for the industry for years.

While Activision has many popular games, Call of Duty is its most important because of its loyal following. The franchise is so dominant with and beloved by hard-core gamers that regulators worry that Microsoft could doom competition in the nascent cloud-gaming industry if it were to decide to withhold access to the franchise from other game distributors.

Unlike console gaming, which is essentially a two-horse race where Microsoft’s Xbox system trails Sony Group’s PlayStation, cloud gaming has many potential competitors. Some regulators argue that not having access to Call of Duty would render any cloud rival unable to vie for users.

The landmark deal—potentially one of the tech industry’s biggest acquisitions ever—is now in peril because of the U.K.’s rejection. While Microsoft has vowed to file an appeal, antitrust lawyers say it will be a hard battle to win and trying to do a deal without the country would be prohibitively costly and complex.

Call of Duty made its debut in 2003, as multiplayer online gaming was taking off in popularity. It stood apart from other first-person shooters on the market by offering superior graphics and for being easy to learn yet difficult to master, said Cowen analyst Doug Creutz.

Call of Duty has remained hot because of Activision’s constant investment, which the company doesn’t disclose but is likely hundreds of millions of dollars a year and hard for competitors to match, Creutz said.

Another factor is inertia. The series has been popular for so long that for many people, it is the one game that all of their friends play.

“Most people I meet who play videogames play Call of Duty," said 22-year-old logistics worker Daven Shealy of Thomson, Ga., who buys every new issue of the series when it comes out in the fall.

Call of Duty’s annual release schedule also makes it stand out from other shooters, said Wedbush Securities analyst Michael Pachter. Few other groups of gaming studios have the talent, infrastructure or money to produce such ambitious sequels every year.

“It’s what makes Call of Duty sticky," he says. “There’s always something to look forward to."

Every year the latest version is set in the middle of a new war, historical or imagined. While the overall look and war theme is consistent year after year, each version is set in a different time period and location, with new story lines, maps and weapons. Three Activision studios alternate taking a lead role in making it, which helps keep it fresh, gamers say.

Unlike most franchises, Call of Duty offers a range of ways to play, including single- and multiplayer; on smartphones, consoles and PCs; and there are both free and paid versions with different objectives.

“Everyone has their taste in games," said Chris Perednia, a New York City middle-school teacher and videogame live streamer. “Call of Duty has it all."

When another multiplayer shooter, Epic Games’ “Fortnite," exploded in popularity in recent years, Activision responded with “Blackout," a game within “Call of Duty: Black Ops 4," featuring the same “battle royale" style of play, in which a large group of players fights until only one is left standing. The company then released a stand-alone version called “Call of Duty: Warzone" with the same free-to-play business model as “Fortnite."

Call of Duty’s popularity has also left it with some persistent problems, according to groups such as the Anti-Defamation League and some longtime fans. They say some players spew racist and threatening remarks over voice chat, in violation of Activision’s rules.

The unacceptable trash talk is more pervasive on Call of Duty than mostother big games, said Annabel Ashalley-Anthony, founder of Melanin Gamers, a London-based nonprofit dedicated to increasing diversity and inclusion in the videogame industry. “It is the worst," she said.

An Activision spokesman said most of the company’s players don’t engage in this type of activity. “We are committed to making our games more inclusive and safe for everyone," he said. “In recent years, we have banned 500,000 accounts on Call of Duty for violating our code of conduct."

Microsoft announced its plans to buy Activision in January 2022 and valued the deal at $69 billion after adjusting for the videogame publisher’s net cash. The companies had planned to close the transaction by the middle of this year.