Following the launch of a merger investigation into Microsoft’s acquisition of video game developer and publisher Activision Blizzard in July, the UK’s Competition and Markets Authority (CMA) said yesterday that it had identified potential concerns about the link
Away from the world of Windows, Azure and other more business-like products, Microsoft takes gaming just as seriously under the banner of its Xbox console and developer subsidiary Xbox Game Studios.
But recent studio acquisitions, notably that of Bethesda owner Zenimax (home of popular properties like The Elder Scrolls series), have sparked challenges in the industry, intensifying with Microsoft’s plan to dodge $68.7 billion of dollars to the famous Activision Blizzard, which owns some of the highest-grossing titles of all time, including World of Warcraft and the Call of Duty series.
With Activision Blizzard independent of home console companies, its properties appear on PC, Xbox, PlayStation and Nintendo Switch. However, there is legitimate concern from both gamers and the industry that Microsoft’s moves could cause these titles to be pulled from competing systems.
There’s also the tech power behind Microsoft that Sony and Nintendo simply don’t have: mastery of the Windows desktop environment and one of the big three cloud computing infrastructures, Azure, under its belt .
Microsoft has already used this knowledge to its advantage, launching the killer app Xbox Game Pass, a game-as-a-service subscription on both Xbox and Windows, as well as Xbox Cloud Gaming, which allows users to play games from Xbox on your phone or an outdated computer or console. Although Sony has PlayStation Now, the strictly cloud-based service struggled to compete in terms of performance, eventually being subsumed by the PlayStation Plus subscription earlier this year.
Nintendo, on the other hand, is Nintendo. It tends not to worry about the moves of Microsoft and Sony, using familiar games with great success, and keeps its IP under lock and key (no Mario on Xbox or PC, ever).
These factors have not been lost on the CMA. Sorcha O’Carroll, senior director of Mergers, said: “Following our Phase 1 investigation, we are concerned that Microsoft may use its control over popular games such as Call of Duty and World of Warcraft post-merger to harm rivals, including current and future rivals in multi-game subscription services and cloud gaming.
“If our current concerns are not addressed, we plan to explore this agreement in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK players and businesses.”
Specifically, the CMA is concerned that the merger could “harm rivals, including recent and future entrants to games, by denying them access to Activision Blizzard’s games or providing them with access on significantly worse terms.” He’s also wary of “combining Activision Blizzard with the broader Microsoft ecosystem,” as noted above. For just one example, bringing World of Warcraft, which requires a monthly fee to play, into the Xbox Game Pass membership could be a revolutionary development given the zeal of its hopelessly addicted player base. The mind gets in the way.
Microsoft and Activision Blizzard now have five business days to submit proposals to address the CMA’s concerns. If these solutions are not satisfactory, the competition watchdog will move the investigation to Phase 2, where an independent panel will consider the deal in more depth, “assessing whether it is more likely than not that a substantial lessening of competition will occur as as a result of the merger”, relate to third parties and consult the internal documentation of the merging companies.
Microsoft president and vice president Brad Smith told The Register by email: “We stand ready to work with the CMA on next steps and address any of their concerns. Sony, as an industry leader, says it is worried about Call of Duty, but we’ve said we’re committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less.”
Also, a spokesperson highlighted a blog post published yesterday by Microsoft Gaming CEO Phil Spencer in which he emphasized the importance of choice, the development of smartphones as gaming systems, and reiterated the Smith’s claims.
“We will continue to engage with regulators in a spirit of transparency and openness as they review this acquisition. We respect and welcome the tough questions being asked,” Smith wrote.
“Today’s gaming industry is robust and dynamic. Industry leaders, including Tencent and Sony, continue to expand their deep and extensive game libraries, as well as other entertainment brands and franchises, that players enjoy everywhere. We believe a thorough review will demonstrate that the combination of Microsoft and Activision Blizzard will benefit the industry and players.”
It’s interesting that he mentions Tencent and Sony, which this week took a 30 percent stake in Japan’s FromSoftware, developer of 2022’s biggest game, Elden Ring, as well as the cult Dark Souls series, perhaps in direct response to the tentacles always invading Microsoft.
Meanwhile, Diablo Immortal, Activision Blizzard’s free-to-play mobile iteration of the long-running action game, grossed more than $100 million through in-game purchases in a matter of weeks. ®