Why did PlayStation buy Bungie in the first place?

Hello there and welcome to the Game Business Micro. Doesn't Summer Game Fest feel like a lifetime ago? Back then, we saw some cool games. There was lots of cool announcements. Things were looking optimistic. Things were looking hopeful. But since then, we've had massive cuts at Ubisoft, but the warning of massive cuts coming at Xbox, and a significant reduction at Bungie, plus some eye-watering prices for the Steam Machine and the Xbox platform. It's certainly been a rough start to the summer. And this week, we're going to dive into two of those stories, Bungie and the Xbox price rises. So, let's jump in, shall we? And let's begin with the Bungie story. So, PlayStation is going to cut most of the Destiny team in significant cuts at Bungie. There's also going to be some layoffs with the Marathon team as well. The firm said in the statement, "As the leaders of Bungie, past and present, we recognize Destiny 2 fell short of expectations these past several years. Following our final content update to Destiny 2, and with our future projects still in early incubation, we unfortunately could not continue operating at our previous size." So, apparently, around 292 roles are being

cut. That's according to a filing at the Washington State Employment Security Department. There's been numerous cuts at Bungie since PlayStation bought the studio back for a $3.6 billion back in 2022. Already, we've had around 700 jobs cut from Bungie. Um the studio head of Bungie, Justin Truman, is stepping down from his role as a result of the cuts. Um as PlayStation alluded to in their statement there, Bungie released the Monument of Triumph expansion on June 9th. It was the final update for Destiny 2. Um they also released Marathon in March, and that game hasn't achieved high numbers. It peaked around 2 million units 2 million players, sorry, in March, according to Ampere. But that has fallen to just over 800,000 in May. However, the fan reception has been strong, and Bungie is now fully focused on trying to drive success for that game. Um to give you a bit of a point of comparison, PlayStation's other big live service game, Helldivers 2, currently has 3.7 million players. The deal hasn't worked out. Um the acquisition hasn't worked out. But this isn't just about the fortunes of the Destiny franchise, it's also about the fate of PlayStation's live service

dream. And to understand what that was all about, we need to go back to the PS4 era. During this period, PlayStation's first-party games business started to show real growth, real success. We had titles like The Last of Us, The Last of Us Part II, Spider-Man, Horizon Zero Dawn, or God of War. They achieved record sales, huge numbers for PlayStation, the numbers they don't normally see. In fact, before the PS4 generation, it was rare to see a PlayStation game break 10 million sales. That was happening regularly during the PS4 era. When I say a PlayStation game, I mean a first-party PlayStation game. This was exciting for PlayStation. The company is effectively split in two. The main part of it is its platform business. That is everything including its hardware sales, the money it makes via the stores, PlayStation Plus, all of that. That's in the platform business. That's the bulk of their revenue. Then there's the first-party business, and with the success of the PS4 era, PlayStation's management was asking itself, "Can we make our first-party games business as big as our platform business?" Now, this wasn't going to be easy. PlayStation was finding that it could get a game to around 10 million sales, even 20 million sales in rare cases,

but it was hard to go beyond that. In an interview or he was PlayStation boss at the time, he expressed frustration at that fact. I mean, I've got a quote here from him. "I think some of the art that our studios are making is some of the finest entertainment that's been made anywhere in the world. And to kind of get the audience for that wonderful art, wonderful entertainment that our studios are making, to get that audience for that at around 20 or 30 million, that frustrates me." Indeed, it felt like PlayStation had hit a sort of ceiling with its games. What's more, the cost of making them and the time it was taking to make them had gone up exponentially. So, PlayStation was facing a generation where its big studios would be making fewer games, spending more money making them, but not necessarily making more money. So, how can PlayStation overcome this to make its first-party games business bigger? Well, there were two ways. The first was to release its games on PC, which might unlock more players. By the way, it didn't really, but know that's a different story. But the big one was around live service. Now, live service games are hard to succeed with. Even back in 2021, it was hard to succeed

with. Not only do you have to make a game people want to play, you have to keep them playing. Games like Fortnite and Call of Duty were dominating the business. It's definitely a challenging market. But, if you can find a hit, it could transform a company's fortune, certainly someone like PlayStation. Live service game revenue dwarfs that of a single-player game. For company like Activision Blizzard, for instance, a single-player project like Tony Hawk's or Crash Bandicoot is almost irrelevant when sitting next to Call of Duty or Candy Crush. If Call of Duty sales are down slightly on the year, it will have a far bigger impact on their business than if Tony Hawk's flopped, for instance. It was unusual, actually, that PlayStation didn't have a live service game. It did operate games like Gran Turismo and MLB The Show, which has some live service components to it. And if you go back in time, there were games like SOCOM and Warhawk that was built as online multiplayer games, plus titles like Killzone, which had online modes as well. But the bulk of PlayStation's output, certainly during the PS4 generation, has been single-player story games. So, that was going to change, and PlayStation embarked on a huge live service push. It was working on live service games from third-party studios,

including Arrowhead, that's the Helldivers 2 folk, Deviation Games, we never found out what game they were making, Firewalk Studios, who made Concord, and Haven Interactive, which is working on Fair Games. And it commissioned a number of internal live service games at Insomniac, um Naughty Dog, Gorilla Games, London Studio, and more. During this time, the video game industry was in a very healthy spot, and PlayStation started doing something a little out of character. It started buying teams. Now, in its history, PlayStation likes to date studios before buying them. They might work with them on one project or maybe a few projects before asking them to become part of the Sony family. So, Insomniac, Naughty Dog, Gorilla Games, Media Molecule, they'd all made a PlayStation game before becoming part of PlayStation. So, it was surprising to see PlayStation acquire developers like Haven, like um Firewalk, when they hadn't done that yet. And then in January 2022, it did something significant. It spent $3.6 billion on Bungie. In PlayStation's view, this was the key to unlocking its live service dream. Not only did Bungie give them a hit live service shooter in Destiny, it also got

them a level of expertise it just didn't have. Bungie had a track record of more than 20 years of building hit online games that would be something all of the studios I just mentioned above could benefit from. Now, there were some worries, of course. Bungie wasn't at its peak when PlayStation bought it. Destiny 2 was showing signs of slowing down. And the studio had received some negative press over accusations of inappropriate behavior by some employees. But, even so, on paper, kind of made sense. I spoke to Jim Ryan at the time of the deal, and he told me, "I would back us to do live service games ourselves. When you have the potential to have a partner like Bungie, who has been there, done it all before, learned the lessons, and have got this wonderful, brilliant team who is there and has the potential to help us, we think we can take something that would have made taken a certain number of years and significantly decrease the time it would take to get it right." So, they thought this could really accelerate their live service dream. Now, there were concerns during all this from fans and even some people internally that there was an over-investment going on with live service. It is fine to expand the studio business into new areas. It's exciting, even. But, what does that mean for the single-player games? Now, Ryan and studios boss Herman Hulst insisted that

those games remained essential pillars of the company's strategy. And And that was actually true. It is still an important part of the company company's strategy. But, with these story projects taking longer to make, and with much of the new investment going into online games, that meant inevitably we're going to see fewer single-player action titles coming to the market from Sony, and that's something the firm's core fans have found frustrating. And then, of course, the industry shifted. Live service was already hard, but post-pandemic, it was proving even harder. It was one thing to coax players away from a Fortnite or a Call of Duty or Counter-Strike, but it was quite another to stop them going back to their home game. Concord proved the big shock, not just to Sony, but to the whole market. It was a huge investment, a significant first-party PlayStation launch, but it completely failed to connect. The game kept got cancelled, the studio closed. Over the following months, PlayStation corrected its strategy. It cancelled projects and closed studios. It was still making some live service titles, but the scale of them, the number of them have been paired back to reflect the market reality. Now, that takes us back to Bungie. Now,

its Destiny 2 game has struggled after the release of the final shape expansion, which effectively concluded the game's story. It retaining the players in a live service game was very difficult at this stage in any title, and Bungie weren't able to keep players entertained once that story had finished. Its next game, Marathon, is a hardcore extraction shooter. It launched in March. Uh Bungie has actually done the hard bit by making a title that actually has actually well regarded, but it's not the most accessible experience, and it's got a lot of work to do to grow that audience. So, that's led us to today, really. Now, PlayStation's live service dream isn't over. It has more titles to come, and it's actually had a hit. It's worth noting Helldivers 2 has done very well. But, like a lot of companies that's over invested in a strategy during a period of very strong industry growth, it is having to course correct. As for Bungie, its focus now is on turning Marathon from a game a few people love into something more significant. The game proves the studio has what it takes, and if the reaction to the end of Destiny 2 is anything to go by, that IP might be something that gamers will gravitate towards again in the future, if there is a future for that IP.

Um but, for now, it's a disappointing end after a strategy that it just isn't working out to the level that PlayStation had hoped. Let's move on to the other story, big story of the week. Xbox has raised the price of its consoles once again as component misery continues. Um so, the Xbox Series S and X is increasing by $100 for the 512 GB models, and $150 for the 1 TB model. Um well, 2 TB model consoles will be discontinued. All the prices go up from August 1st. To put that into context, this drive version of this Xbox Series X uh 1 TB is now $800. It's quite expensive. Xbox expects these memory shortages, which is causing these price rises to go on for 2 years. This is actually the third price increase. It increased twice last year. The Xbox Series X disk drive model now costs $300 more than it did at the launch of the console. Um Xbox has added some new programs to try and, you know, mitigate this. They There's a new buy now, pay later options through Microsoft stores and interest-free financing for up to 12 months via Amazon. All consoles, of

course, being impacted by the this with PlayStation significantly raised the price of PS5 in March. Nintendo raised Switch 2 prices in May. Comparatively, slightly actually. Nintendo's price rise was quite small. Xbox, by the way, this is fascinating to me, is also leaning into pre-owned, supporting retailers by offering deals on second-hand Xbox consoles. So, here we are again. We've had all the price rises. We've had that horrific Steam Machine price as well. And now it's Xbox's turn. Um the component crisis is just getting worse, not better. Um things might settle down in 2028, but certainly not before then. The question is whether Nintendo's relatively small increase is enough or perhaps they might need to go up again. In a way, what else is there to say? It's a real existential threat for the whole video game business as the ability to play games is becoming only really something the affluent can afford to do. There's now an expectation that we won't be getting a new PlayStation or Xbox console in 2027, probably 2028 now. Um what's interesting here is that Xbox is trying to come up with some solutions. So, there's that buy now, pay later finance schemes, basically. They're not new. They've existed before,

but this is they're actively promoting it this time cuz Xbox is really trying to bolster its hardware business. It's trying to get more people playing its consoles. GTA 6, of course, is only launching on Xbox and PlayStation. So, that's expected, of course, an increase in interest for those platforms. And just before that, Xbox is releasing the new Gears of War game exclusively on Xbox and PC. It won't be coming on PlayStation. So, Microsoft wants to grow its audience this year, and those prices are a barrier to doing that. So, actively highlighting new schemes to make those devices more accessible or they're going to prove crucial. I found it again fascinating that Xbox is actively promoting second hand and pre-owned sales. What a world we live in. And but that side of the market is likely to do well in this climate and leaning into that I think is quite a smart move. They could do more, maybe console rental schemes, new offers around the cloud gaming streaming. I wouldn't rule anything out as platform holders, not just Microsoft, try to navigate this crisis. So those are the big stories of the week, but there were lots of other stories that I could talk about. Um we've had the Circana data in. So Circana is the US games market tracker that tracks US game sales.

They've revealed that game revenue reached 3.8 billion in May 2026, just 1% up compared to a year ago. Year-to-date game spending remains 3% ahead of 2025 at 20.4 billion dollars, so it's doing okay. Um 007 First Light was the number one game by revenue and is already the fourth best seller of the year. Uh the launch month four game dollar sales of 007 First Light was the highest for a James Bond video game in the franchise's history. So well done IO Interactive there. The number two game was Forza Horizon 6, number three LEGO Batman Legacy of the Dark Knight, and number four Subnautica 2. Um hardware revenue it looks good, it's at 38% over May last year, but that's driven by Nintendo Switch 2. PS5 spending is actually down 43% over May last year. Of course, sales may now slow down for the console sector. So this is the last month where the Switch 2 is going to boost the market cuz in June last year Switch 2 launched, so now Switch 2's when we're going to see light for light comparisons there. So hardware sales might start to slow down in the US. Uh PlayStation hardware unit sales in May actually fell to their lowest total

since May 2000. While Xbox hardware unit sales were the lowest ever recorded for a May month, so real problems for the console market going on in the US. Speaking of another console company, Nintendo's new development building has been delayed again. Um this is the new office that covers 49,305 square meters across 10 floors and is designed to be the new hub for software and hardware uh R&D at Nintendo. It was initially intended to be finished by the end of 2027. That was delayed until 2028 due to they increased the scope basically, but now it won't be ready until March 2029. The whole project's going to cost about $750 million. This isn't you would have Everyone's been talking about this. GTA 6 has a slightly higher price compared to other AAA games. Unsurprisingly, really. It's going to have a $79.99 price tag for the standard edition and a $99.99 price for the ultimate edition. Of course, the story everyone's talking about is the physical copy of the game won't be on disk at launch. Maybe. Maybe they'll release a physical version afterwards. We'll have to see. Another story that broke on Friday,

Italian studio 34 Big Things has spun out of games conglomerate Embracer Group. The company's co-founder Valerio Di Donato has bought 100% of the studio's stock. Going into another country, Japan, Kadokawa Corporation CEO Takeshi Natsuno has retained his position after an activist investor tried to force him out due to the performance of developer FromSoftware. He retained his position at the annual general meeting, but his support dropped from 90% to just under 60%. Hong Kong-based activist investor group Oasis Management has pushed to have him replaced because it felt that the firm should have done more on to capitalize on the success of Elden Ring. Nothing like milking a franchise dry, eh? But, they didn't succeed. I talked about this on the show this week, the new show last week, sorry. You should definitely listen to that. It was a really good one with George Osborne. We talked about this new fund from Denmu. Denmu is a fund that's got $50 million that's available for authors. It will support AAA, AA, indie, free-to-play, PC, console, mobile games, but it's specifically looking for visionary game makers. The fund organizers are also connected with the Chinese and Japanese games markets and are hoping to bridge the gaps between

Western and Eastern companies and audiences. It's already funded It's already backed a bunch of games. The Hundred Line Last Defense Academy, Blue Protocol Star Resonance, Bleach Soul Resonance, Labyrinth of the Demon King, Moto Slice, and Silly Polly Beasts. It's also backed a AAA title based on a major entertainment IP. Over the next 2 years, Denmu plans to invest in between 10 and 20 projects. If you want to go to the game the previous last week's episode of The Game Business Show on Thursday, you will see that we had a little mini mini interview with David Yu, so you can see some of their some of their words if you want to understand their thinking behind building an all turf based games fund. Uh last couple of stories, Atari's mobile games has launched a LinkedIn rival but for video games where industry professionals can create profile files that record their career progress and achievements. They'll also be personalized job listings, insight and tracking. I said this on the new show this week. Running a job board is difficult in this industry. Good luck to mobile games. I know they've got obviously a great base. And finally, sad news. One of the co-founders of French games giant Ubisoft, Claude Giraud, has been killed in a plane crash aged 69. Now, that's it for today's episode of

the Game Business Micro. If you enjoyed that, do consider becoming a paid subscriber. We do it every week on the Game Business Show. Um join us back here tomorrow with our bumper interview with Jason Rubin which we conducted at the Game Business Live. The Crash Bandicoot director and Naughty Dog co-founder looks back at his career. We've got a bunch of special guest appearances as well from like Ted Price and Shuhei Yoshida and a bunch of people from Meta and all sorts of THQ. But, until then, thank you for tuning in.