The Competition and Markets Authority has detailed its concerns about Microsoft’s proposed acquisition of Activision Blizzard.
The UK regulator is seen as a key element in whether this arrangement will be allowed to proceed. The contract did not go through the initial stage of approval and passed sent to the second stage.
Now, the group has voiced its concerns about the deal, and Microsoft has responded.
Impact on PlayStation and other competitors
The CMA is concerned that the deal will hurt PlayStation and other multi-game subscription offerings because Microsoft could withhold Activision Blizzard content from them. The agency is also concerned that Microsoft could use Activision Blizzard, along with other Microsoft services, to overtake rivals such as Google, Amazon and Nvidia in game streaming.
“There is a real prospect of significantly reduced competition in game consoles, multiple game subscription services, and cloud gaming services,” the firm said in an extensive filing.
“There is a real prospect of a significant reduction in competition”
Competition and Markets Authority
CMA points to the “network effect” of the console market, where a console with more players attracts more content, which in turn attracts more players. And the firm worries that any potential exclusivity gains on Call of Duty and Xbox will create a huge net effect on Microsoft’s platform.
“The CMA is concerned that having full control over this powerful catalog, particularly given Microsoft’s already strong position in game consoles, operating systems and cloud infrastructure, could reduce the productivity of Microsoft’s closest gaming competitor, Sony, to consumers. may result in damage. It competes with other existing competitors and potential new entrants who can bring healthy competition through innovative multi-game subscriptions and cloud gaming services.”
Subscriptions are the main area of concern, as the CMA believes that without this deal, Activision Blizzard games could (or even likely) come to other subscription services.
“CMA recognizes that ABK’s newest games are not currently available on any subscription service on launch day, but believes that this may change as subscription services continue to grow. After the merger, Microsoft will gain control of and leverage this important access.” . to harm the competitiveness of its competitors”.
In terms of streaming, CMA’s concern is around its potential in this market due to Microsoft’s ownership of the Azure cloud gaming service, plus its PC operating system. It believes this, along with its ownership of Activision Blizzard, will give Microsoft an “unparalleled advantage” over other cloud streaming providers.
“These unsupported theories of harm are insufficient to justify a referral to Phase 2,” Microsoft said in a detailed response to the decision.
As for concerns about the CMA’s impact on PlayStation, Microsoft says there are numerous reasons why those concerns are “misplaced.”
This shows PlayStation’s current market leadership position with a console install base of 150 million versus an Xbox install base of 63.7 million. He also states that Sony’s current market leadership has seen it carry out practices such as raising the price of its console “without fear of losing market share”. This comes on the heels of recent news from Sony price increase of PS5 following increased production costs.
xbox answers
in comments shared with GamesIndustry.bizMicrosoft made the biggest claim: “The suggestion that an existing market leader with clear and enduring market power could be overtaken by a third-party provider as a result of losing access to a title is not credible.”
“PlayStation’s player base will remain significantly larger than Xbox’s,” Microsoft said, though it didn’t share any numbers, but if every Call of Duty player on Sony’s console migrates to Xbox.
“Sony has the ability to adapt and compete, even if it does not welcome increased competition”
Xbox
Microsoft also talked about the level of content available on Sony’s platform. Pointing to some of Sony’s recent (but significantly smaller) acquisitions, the company says PlayStation has more than 280 first- and third-party exclusive titles in 2021, nearly five times as many as Xbox.
“In short, Sony is vulnerable to a hypothetical foreclosure strategy and relies on Sony’s self-serving statements in the Referral Decision that significantly overstate the importance of Call of Duty to it and ignore Sony’s ability to respond competitively,” Microsoft added.
“While Sony does not welcome increased competition, it has the ability to adapt and compete. Gamers will ultimately benefit from this increased competition and choice.”
Once again, Microsoft reiterated its intention to keep Call of Duty on PlayStation consoles. It said that moving Call of Duty away from PlayStation would “alienate” the fan base and “tarnish both the Call of Duty and Xbox brands.”
Microsoft claims that bringing Activision Blizzard games to Game Pass will offer players more choice in how they access content, the company’s main motivation behind the deal.
Microsoft has not suggested that it will make Call of Duty available on other subscription services. However, the company noted that Game Pass is not available on PlayStation, disproving the CMA’s concerns that such a deal would “bias” subscription services in Xbox’s favor. Microsoft also believes that with the continued popularity of traditional buy-to-play and free-to-play models, Game Pass will always face strong competition.
Microsoft concluded this area of the CMA’s concern by saying that if gamers choose to leave PlayStation for Xbox, it’s because Xbox offers a choice in its approach to how games are purchased.
“If any consumer decides to switch from a gaming platform that doesn’t give them a choice about how to pay for new games (PlayStation) to one that does (Xbox), that’s the kind of consumer switching behavior that the CMA requires. Think of it as welfare-enhancing and indeed encouraging. , should not try to prevent the CMA.”
Streaming concerns
The CMA’s second area of concern is Microsoft’s use of Activision Blizzard to dominate game streaming using Microsoft-owned cloud service provider Azure and its PC operating system, along with that content.
This is one of the more complex areas to analyze because it is a part of the gaming business that is still in its early stages of development.
Microsoft believes that currently Microsoft’s Xbox Cloud Gaming service does not use Azure and does not stream games from PC hardware.
“Xbox faces significant disadvantages compared to rival providers of infrastructure for game streaming”
Xbox
“There is no preference,” the company said. “Indeed, Xbox believes it faces a number of significant disadvantages compared to rival providers of infrastructure for game streaming.”
The CMA is concerned that the Activision Blizzard deal, along with other products at Microsoft’s disposal, could create barriers to entry for cloud gaming services and potentially ‘cloak out’ competitors.
However, Microsoft has insisted that blocking out potential competitors in the game streaming space runs counter to what made it a successful distribution model in the first place.
“Consumer adoption of cloud gaming remains low,” he said. “Harming or undermining competing services will significantly set back the adoption of this technology – protecting the market leaders (eg Sony on console, Apple and Google on mobile, and Steam on PC).
“As a platform in last place on console, seventh on PC and nowhere in mobile gaming globally, Xbox has no incentive to do this – instead, its incentive is to encourage the widespread adoption of cloud gaming technologies by many providers . as much as possible to encourage the fundamental change in consumer behavior required for cloud gaming to succeed.
The CMA will release its preliminary results of the second phase review in January, with a final report expected on March 1.
The US regulator, the FTC, is also conducting a phase two investigation. There is an agreement It has already been approved in Brazil and Saudi Arabia.
You can learn more about the deal and the regulatory hurdles it faces our affordable primer.
