Meena Alnajar is an IPilogue Writer, IP Innovation Clinic Fellow, and a 2L JD Candidate at Osgoode Hall Law School
Although many aspects of life have become virtual, video games have always been virtual and well-loved. Behind every video game, there is a video game designer. And behind every designer, there is a publisher.
As of January 31, 2022, Sony Interactive Entertainment (“Sony”) is behind the video game publisher Bungie. Sony acquired the independent Washington-based publisher for $3.6 billion USD. Sony is no stranger to the video game industry, having created the world-renowned PlayStation. However, Sony’s acquisition raises questions regarding the state of Bungie’s existing games, what freedoms Bungie has in terms of video game creation, and how the acquisition affects video game competition.
An acquisition is when one company purchases most or all of another company’s shares to gain control of that company. Unlike a takeover, acquisitions are typically more ‘friendly’ as both parties tend to agree to the terms of the acquisition for the purchase to proceed. Acquisitions may occur where a company prefers to purchase another company’s successful , rather than spend developing similar products.
In Sony’s case, it is likely more cost-efficient to purchase Bungie and gain some ownership over its future games than to create games itself for its PlayStation consoles. After all, Bungie has created bestselling games such as Halo and Destiny. While Sony’s gains in this acquisition are clear, will Bungie lose recognition for its games in the future?
According to The Verge, Bungie will maintain creative independence within Sony, self-publishing games while still fully owned by Sony. The ownership raises questions regarding Bungie’s intellectual property rights. Rather than giving Sony exclusivity over its games, Bungie has committed to keeping games available on both Microsoft-owned Xbox and Sony consoles.
A video game is full of potential intellectual property interests. The design, stories, source codes, and music can all fall under this protection. Further details regarding Bungie and Sony’s intellectual property agreements have yet to be divulged. Typically, there is a push-pull in a merger involving video games. The buyer in the acquisition should take inventory of the acquired company’s assets (including their intellectual property) and attempt to acquire as many rights as possible. On the other side, the seller should register as much of their intellectual property with the government as possible, to ensure the seller commits to licensing agreements prior to the acquisition’s completion. These considerations can help balance each party’s gains and losses in large acquisitions.
Sony’s acquisition follows a trend in big video game purchases. On January 18, 2022, Sony’s competitor Microsoft purchased Activision Blizzard in a $69.3 billion USD acquisition. Once this deal closes in 2023, Microsoft will have internal game development studios. As these acquisitions effectively reduce the number of independent video game developers, could this be an issue for competition? U.S. competition regulators are currently scrutinizing Microsoft’s acquisition to determine if it will allow Microsoft to unfairly dominate the video game market and wipe out competitors. While acquisitions can be fruitful for some, there are intellectual property and anti-trust considerations that can make these deals a losing game for independent video game developers.