The big story in the E-gaming world continues to be the saga of Microsoft’s attempt to close its $69 billion acquisition of Activision Blizzard (held by the Fund).
After the U.K.’s competition authority blocked the acquisition in April, and the E.U. and China joined 37 other countries in giving the deal the green light in May, all eyes turned to await the decision of the U.S. Federal Trade Commission (FTC) as to whether the deal could proceed.1
In mid-June, the FTC received a court injunction to temporarily block the acquisition and a U.S. District Court in San Francisco agreed to hold a hearing just days later.
During the weeklong hearing, the court heard testimony From the FTC arguing that the acquisition would harm competition within the video game sector based on concerns that Microsoft could make Activision’s library of games exclusive to its own Xbox console at the expense of other platforms, such as PlayStation. The FTC further argued that controlling Activision’s library of games would also give Microsoft an unfair advantage in the emerging cloud gaming space.2
Microsoft CEO Satya Nadella and Activision CEO Bobby Kotick both appeared in court to argue their companies’ commitment to “open platforms and consumer choice,” pledging (as they have already done in other jurisdictions) not to withdraw Activision’s games from rival consoles and citing the potential for backlash and reputational damage amongst the gaming community should they do so.3
A decision from the judge hearing the case is expected imminently, as Microsoft and Activision Blizzard have set a drop-dead date of July 18 to terminate the deal if it is not completed. Should the court rule against Microsoft and Activision, the FTC wants to further adjudicate the acquisition in their own internal court before granting any decision—a delay which would likely sink the deal entirely.4
Updates on Specific Companies
NetEase and Warner Bros. Games announced the release of their highly anticipated, free-to-play mobile game, Harry Potter: Magic Awakened, based on the bestselling book and movie series. The game is a collectible card roleplay game (RPG) set in the world of Harry Potter. The game saw its global launch as free-to-play on both the App Store for iOS and Google Play for Android. Co-developed and co-published by NetEase and Warner Bros. Games, Harry Potter: Magic Awakened is the latest release under the Portkey Games label. Portkey focuses on mobile and platform videogame experiences inspired by the world of the Harry Potter franchise.5
Take-Two Interactive Software, Inc.
Take-Two Interactive Software’s publishing label Private Division, in partnership with boutique game studio Evening Star, announced a new character-driven platforming action game, Penny’s Big Breakaway, set to arrive on Nintendo Switch, PlayStation 5, Xbox Series X|S, and PC in early 2024. The stylized, colourful adventure game will see players in the role of Penny as she tries to escape a variety of challenging levels. Penny’s Big Breakaway is not yet rated by the ESRB.6
Diversified Investing in Video Games with HERO ETF
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Portfolio Strategy and Activity
For the month, NetEase Inc made the largest contribution to the Fund, followed by Nintendo Ltd and Take-Two Interactive Software, Inc. The largest detractors to performance for the month were Roblox Corp, followed by Nexon Co Ltd and Netmarble Corp. To learn more about HERO ETF, please click here: https://evolveetfs.com/hero/.
- Fineman, J., “Microsoft’s planned $69B Activision purchase gets China antitrust approval – report,” Seeking Alpha, May 19, 2023; https://seekingalpha.com/news/3973465-microsofts-planned-69b-activision-purchase-gets-china-antitrust-approval-report
- Browning, K. & McCabe, D., “Microsoft Says It Could Abandon Activision Deal if Judge Delays It,” The New York Times, June 22, 2023; https://www.nytimes.com/2023/06/22/technology/microsoft-activision-federal-hearing.html
- Browning, K., “Microsoft and Activision Chiefs Testify Merger Will Benefit Consumers,” The New York Times, June 28, 2023; https://www.nytimes.com/2023/06/28/business/microsoft-activision-ceo-testify.html
- Novet, J., “The biggest takeaways from Microsoft’s courtroom showdown with the FTC over Activision Blizzard,” CNBC, June 30, 2023; https://www.cnbc.com/2023/06/30/microsoft-activision-showdown-with-ftc-biggest-takeaways.html
- “Warner Bros. Games and NetEase Announce the Worldwide Launch of Harry Potter: Magic Awakened,” NetEase, June 27, 2023; https://ir.netease.com/news-releases/news-release-details/warner-bros-games-and-netease-announce-worldwide-launch-harry
- “Private Division and Evening Star Announce Penny’s Big Breakaway,” BusinessWire, June 21, 2023; https://www.businesswire.com/news/home/20230621006468/en/