International negotiation

Case: Sony’s acquisition of Bungie studios

Student:

Ian Otero Heredia

Professor:

Stephan Langdon

University de La Sabana

2023-1

More than an acquisition more than a need

  Introduction

The world of gaming had an uproar when with the recent news that the multinational
Sony, a leader in consumer electronics and audiovisual entertainment, was acquiring one of the
most recognized video game development studios for 3.6 billion dollars known as Bungie Studios,
responsible for video games with a high impact on gamer culture such as Halo or Destiny.

In January 2022, completely unexpectedly, Sony announced the acquisition of Bungie

Studios. This unexpected move left many experts and players waiting for the unexpected at the
sideline of what would happen to highly renowned games like the ones developed by the
company. Given the recent panorama of competition from entertainment companies buying large
studios such as recent Xbox 68.7 billion dollars deal for Activision acquisition, it could be expected
that a studio of this nature would receive an offer soon. Although, this company had always been
independent and did not require the support of large companies, it was never expected that direct
competition from Microsoft in the gaming world would dare to make such an aggressive and
immediate purchase move of a studio that has had as much of a close relationship with Microsoft
as Bungie Studios had.

However, this negotiation strategy of Sony goes far beyond defensive acquisition as many
experts affirm, such as the case of Pelham Smithers, an independent analyst, who claimed the
acquisition as a defensive move that would give Sony leverage to threaten Bungie's next big
release a PlayStation-only game. "It's mutually assured destruction." Xbox could also develop after
the Activision purchase, which is one of the most recognized developers in the market after
developing famous franchises such as Call of Duty and other famous videogames. (Asgari &
McGee, 2022).

Instead, it was stated that Bungie will continue to work as an independent Studio,
maintaining its creative freedom, and still releasing its games on a multiplatform even if they are
now part of Sony family. “At Sony, Bungie will remain a standalone game studio, but its expertise
will be woven into the company’s strategy for PlayStation Studios, the division of Sony Interactive
Entertainment dedicated to making tentpole games that showcase the company’s technological
prowess”. (Hatmaker, 2022).
 These factors led many experts to really question the interests of this agreement, since it
does not seem to provide a clear or immediate benefit. Therefore, by further analyzing the ideas
and direction of both parties we can understand what an agreement of this style can lead us to
and the different implications that an agreement of this style may carry. In this case where both
companies collaborate to maximize their opportunities, also as Menkel stated we can understand
that "when parties work collaboratively to achieve joint gain, they are using integrative bargaining
conceptions and behaviors. Negotiation offers the opportunity to make things better than they
were before" (Menkel-Meadow, 2022).

This allows us to understand that both parties have an even greater objective and that
they go beyond competing in the market or responding to their competition, but that they are also
filling a need and achieving new opportunities. During integrative bargaining collaboration is
greatly important, allowing these companies to generate more support to expand their business
together with their interests and needs to diversify their ideas and find creative solutions, which is
what both Bungie could achieve from Sony being a multinational with a large amount of resources
and high financing capacity, and Sony from Bungie being a developer with gain experience in the
service and high-impact video games that have marked generations.

 Literature review

The acquisition model from one company to another has become very attractive when it
comes to doing business to expand the market of companies, both to access and make use of the
resources of both parties. Therefore, acquisitions become a very useful tool for business, since
they allow us to integrate both parties to generate a benefit or greater performance, which makes
it important to analyze the negotiation also to determine and understand the success of the
negotiations and it deserves more attention than what was given to the experience of doing
business, where understanding the reaction of the business becomes ephemeral and loses the
range of vision of what is beyond the negotiation, what can be achieved when we analyze the
integrative negotiation that a deal of this nature implies.

Several integrative negotiations need a lot of understanding from both parties and require
social factors to work such as communication, cooperation, and common interests to work, as
they go hand in hand to forge a bond of trust between the power of both parties and their
objectives, which allows them to forge a relationship in the negotiation that determines an
effective business strategy with a purpose that expands. The following literature review attempt to
demonstrate and support this hypothesis.

As Carmen Saorín from Valencia University states “the studies focus on learning how to
successfully integrate the companies after these operations. (...) But on the other hand, the
negotiation has received less attention, even though their role can be key in the success or failure
of the acquisitions”. (Iborra & Juan, 2008). In this way, the negotiation processes in these cases
can be the link between decision-making and the actual development of the strategy behind this
type of action.
In research article by Patricia Elgoibar “the main objective of social dialogue is to promote
consensus and democratic participation among stakeholders” (Elgoibar & Shijaku, 2022). This
indicates that it is important to dialogue at the moment of being integrative with both parties,
being a basic action at the moment of promoting a negotiation, which brings a significant benefit
to companies seeking to expand after an acquisition, since social dialogue is a key to integrative
negotiation as Menkel-Meadow (2022) describes us in his book where a framework of integrative
negotiation is proposed and where different factors may be evident in this case of Sony and
Bungie, such as collaboration, the explore of needs and interests, creative solutions, the
complementation of both parties, and the expanded opportunities, among others.

Therefore, as Holbrook (2014) explores in his article, this type of negotiation requires great
communication so that the proposed standards are properly developed and the needs of both
parties are not only satisfied, but also expanded and fulfilled. This may imply that there are certain
limitations in the negotiations that imply the integrity of both parties. During the integrative
negotiation we can also demonstrate a "more expansive view of both resource use and self-
interest."' (Holbrook, 2014). Which implies that both parties have to give up something, since
Bungie will have to give up some of its independence and interests to align them with those of
Sony, no matter how independent it remains, and it will have to participate in projects outside its
own Studio, while Sony must provide resources and tools, which translates into higher expenses
and greater wear and tear in addition to the economic one to keep this project afloat and meet
the objectives that will be explored later.

On the other hand, during Zhou investigation (2014), control, feedback and atmosphere are
key factors that also influence integrative negotiation, which are internal and external social
factors that take place in moments of understanding a negotiation, giving it meaning and being
successful in it.

The focus of the investigation was to understand the outcome Priming Effect in integrative
negotiation, which led to evaluate and understand that emotions as social factors are of great
implication when doing business, which is transformed in this negotiation as the opinion of
consumers who worry about losing the opportunity to try various games in their platform since
Sony and Microsoft compete directly, being a possibility for players to lose their power as
consumers and have to abstain from what their consoles or other developers can offer them,
losing the opportunity to continue enjoying the sagas they love which may become exclusive.
Therefore, Sony and Bungie led the agreement to stay their vision open and think about the
players, as well as expand their joint purposes at the time of acquisition.

 Explanation of case

As Jim Ryan (CEO of Sony Interactive Entertainment) stated, “Bungie Studios is an expert
company in creating games as a service and not just as a product, as they provide multi-platform
game service experiences and have an incredible ability to build strong fan communities”. (Ryan J,
2022). This can be understood as an integrative negotiation strategy, so these kinds of companies
may help Sony achieve its ambitions of taking the PlayStation brand beyond consoles, thus
increasing its audience, bringing its products, such as video games, closer to an experience and a
multiplatform service as previously achieved by Bungie with games that managed to maintain a
harmonious experience between consoles and PCs.

In this order of ideas, the panorama is expanded for both companies, where they can
compete with many more options that allow them to remain competent, which allows them to
maximize the way in which they can stay in the market, improving what they already had, because
both Sony and Bungie can benefit greatly from this deal and perhaps, they needed more than they
thought. This strategy bets on what the Studio can offer them to expand the intellectual properties
of the developers that PlayStation already has, where they seek a unified community where
entertainment can cover entire generations by now having more resources and an increase in
their staff, taking their experience outside the gaming world to the movies or TV, and just as
Bungie will be able to help other Sony studios, they will also be able to help Bungie, in this way
changing the future of both companies. Which result in the fact that many games are still
multiplatform, and that the adaptation of these games is being carried out in various media such
as cinema and the big screen, currently on various streaming platforms, which is attracting new
consumers to get interested in the projects developed by Sony and Bungie.

In this way we see how both parties complement and validate themselves, expanding
together by helping each other, although Sony must take care that Bungie does not generate the
results it expects to receive, while Bungie faces the giant Sony as its new director, because even if
it remains independent, it must provide results and adhere to the organizational structure of the
Asian giant

 Conclusion

As established in this case, the integrative negotiation is very important at the time of
bargaining between two entities during acquisition, several external factors such as Microsoft
strong competition led to this acquisition decision being made. However, the purpose went
beyond a defensive strategy and it managed to transcend thanks to the integrative negotiation,
where various social and strategic factors affected the negotiation, allowing it to expand and
develop in a complementary way.

Thanks to the analysis carried out, it becomes evident that the integrative negotiation is
directly applied in this negotiation, and are the internal factors which makes this type of
negotiation really convenient, also it developed the experience for both parties with the various
implications and key concepts that led to the success of this situation, since the social factors
involved in this case led to the purposes being expanded and the mission of the companies
complementing the vision of both to reach an agreement that would benefit both parties and
make them stronger.

However, there are some limitations that must be considered, since both parties are giving up
their resources so that the negotiation can be successful, thus integration also requires
commitment, compromise and cooperation, which can become a problem since it generates a
certain degree of dependency. Therefore, if one party fails to achieve its objectives or has a
problem it may cause big problems for the other party.
 Bungie should take advantage of the resources that Sony can provide to develop new forms of
consumer experience, as well as new ways to play, which will allow Sony to explore different
markets where it is looking to penetrate, but has never been able to conceive of real success, such
as multi-sensory experiences, while Bungie could find a new way to develop games and innovate
in the world of gaming.
  Bibliography

Asgari, N., & amp; McGee, P. (2022, January 31). Sony buys Bungie for $3.6B as dealmaking
sweeps gaming sector. Financial Times. Retrieved February 26, 2023, from
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Hatmaker, T. (2022, July 15). Sony officially owns Bungie Now. TechCrunch. Retrieved
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%20Sony%20CFO%20Hiroki
 Menkel-Meadow, C. (2022) Negotiation: A very short introduction. 1st edn. Oxford, United
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Iborra, C. S., & amp; Juan, M. I. (2008). The negotiating behavior in the not hostile
acquisitions. To be competitive or integrative? UCJC Business and Society Review (formerly known
as Universia Business Review). Retrieved February 26, 2023, from
https://journals.ucjc.edu/ubr/article/view/658

Elgoibar, P., & amp; Shijaku, E. (2022, May 30). Bringing the social back into sustainability:
Why integrative negotiation matters. MDPI. Retrieved February 26, 2023, from
https://www.mdpi.com/2071-1050/14/11/6699

Holbrook, J. R. (2014, June 7). Using performative, distributive, integrative, and

transformative principles in negotiation. SSRN. Retrieved February 26, 2023, from
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2446704

Zhou, J., Zhang, Z.-ran, & Xie, T. (2014). Making collaborators happy: The outcome
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