Shares in Japan’s Sony Group fell 9 percent on Wednesday after gaming rival Microsoft said it would buy developer Activision Blizzard for a record $68.7 billion (about Rs 512,375 crore).

While Sony’s PlayStation is widely seen as leading the generational battle with Microsoft’s Xbox, the acquisition of the Call of Duty maker comes at a time when Microsoft is aggressively expanding its Game Pass subscription service.

In recent years, Sony has beefed up its network of in-house game studios and released a slew of exclusive games, including its Spider-Man franchise, while Microsoft is catching up. Amir Anvarzadeh, a market strategist at Asymmetric Advisors, recommends shorting the stock, he wrote in a note to clients.

Sony, a pioneer in virtual reality, announced some interesting details about its next-generation headset this month, but deep-pocketed non-traditional players like Facebook owner Meta Platforms are investing in virtual worlds or virtual online worlds.

PlayStation is Activision’s main source of revenue, complicating any potential decision by Microsoft to remove games from Sony’s systems and squeeze its rivals. Many industry watchers believe that operability across multiple platforms is essential for users to play, shop and work freely as the cloud improves ties to the massive gaming hardware that has made Sony and Microsoft the industry gatekeepers.

“If Microsoft continues to offer these games to the (PlaySation) platform as well, it suggests it could be positioning itself in the metaverse for the long term,” Jefferies analyst Atul Goyal wrote in a client note.

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