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Sony shares tank over 12% in response

Gaming enthusiasts and industry professionals walk between the Microsoft Xbox and Sony PlayStation shows at the E3 show on June 16, 2015 in Los Angeles, California.

Christian Petersen | Getty Images

Sony stock fell more than 12% in Tokyo on Wednesday after Microsoft announced plans to buy Activision.

Investors are likely to fear increasing competition for Sony's PlayStation division as well as the potential for Microsoft to pull some popular games off the Japanese entertainment giant's platforms.

For some time, Sony has been ahead of Microsoft with its portfolio of first-party games, making it possible to stay ahead of the console wars. However, 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.

This content can help drive Microsoft's subscription strategy around Game Pass, a monthly payment service that gives users access to a library of games across different devices. It's a rival to Sony's "PlayStation Plus" and "PlayStation Now" services.

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

But investors fear that Microsoft may take these games away from PlayStation platforms, giving the US company more attractive content to rival Sony.

"There is no doubt that this agreement weakens Sony's position in the market," said Piers Harding-Rolls, game research director at Ampere Analysis, in a note released Wednesday.

"Whether Activision Blizzard's content is gradually made exclusive to Xbox platforms and services, the inclusion of new releases in the Xbox Game Pass for several major gaming franchises, including Call of Duty, will undermine Sony's third-party business. Sony has taken advantage of this opportunity. negotiate timed exclusive content for Call of Duty, but this is now threatened. "

Overreaction?

Sony has been investing heavily in exclusive first-party content for some years, which has made it possible to bring exclusive hit games like Spider-Man and The Last of Us to PlayStation.

Meanwhile, it has invested in virtual reality, and this month they have launched their second generation headset called PlayStation VR2.

Serkan Toto, CEO of Tokyo, Japan-based consulting firm Kantan Games, said Sony is likely to continue to focus on strong content.

"Sony will still continue to push blockbusters out, there can be no doubt about that," Toto said.

"I think the market has totally overreacted in Japan today," he added.

Sony itself is no stranger to acquisitions though not close to Microsoft's size. Last year, the Japanese company devoured a handful of small studios, including Valkyrie Entertainment, the creator of the hit game God of War. Toto said Sony is likely to chase further acquisitions.

"Of course, Sony can fight back: they still have their own top studios internally spread around the world, PlayStation remains a strong brand in gaming, and acquisitions are also in the cards for Sony," he said.

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