Sony’s Bungie Jump Won’t Scare Microsoft

The latter is likely a major driver of Sony’s SONY 4.51% move, given the harsh reaction by the company’s shareholders to the prospect of the Xbox maker combining with the owner of major videogame franchises like “Call of Duty,” “World of Warcraft” and “Overwatch.” Sony’s share price had slid 14% between Microsoft’s Jan. 18 announcement and Friday’s close. Microsoft has promised to honor existing Activision contracts, which reportedly will keep “Call of Duty” versions available for PlayStation users for the next few years at least. But Microsoft is still Sony’s main rival in gaming consoles, which makes such a significant, strategic move hard to ignore.

Bungie is no Activision, though. It is considered a top-notch developer, one that first created the “Halo” franchise that helped establish Microsoft’s Xbox as a viable gaming platform. But Bungie doesn’t have the same level of fully-owned game properties; Microsoft owns the rights to “Halo” and has continued to put out sequels with other developers. Bungie’s biggest owned game is a shooter called “Destiny.” It draws a decent audience among PC gamers on Steam but performed poorly enough for original owner Activision that the publisher sold Bungie back the rights to the game in 2019.

Sony’s own announcement suggests the deal is more about future games Bungie might create. The deal also underscores how difficult it will be for the company to go head-to-head with Microsoft in an acquisition war. Microsoft has a war chest of $79 billion in net cash and generates about 13 times the annual free cash flow of Sony, according to FactSet. And Microsoft has shown a willingness to commit increasing sums to build up its games business; Activision is the company’s third major gaming deal since 2014.

Sony has some big guns, but you don’t bring guns to a cannon fight.

Write to Dan Gallagher at dan.gallagher@wsj.com