MOBILE

Mobile Mavens: Activision Blizzard: So what will happen next? | Pocket Gamer.biz

Microsoft’s bid to acquire Activision Blizzard, which, if finalised, would be the biggest acquisition in gaming history with a massive sum of $68.7 billion, has been rumbling forwards and continues to be a hot topic with implications all across the gaming industry.

The UK’s Competition and Markets Authority blocked the deal citing the reason that Microsoft could dominate and control the cloud gaming market. And in the latest twist we’ve since seen the EU and China approve the deal, giving ammunition for Microsoft to appeal against the CMA’s decision and leaving the UK very much as the odd one out.

But what does the gaming industry think of all of these recent developments? Is the deal good for the industry or bad? Is the CMA’s decision right, or are their concerns misguided? And – most interestingly of all – what’s going to happen next.

We asked the experts. Here’s what they said. 

Mobile Mavens: Activision Blizzard: So what will happen next? | Pocket Gamer.biz

I believe the UK CMA blocking the deal is bad for the industry for multiple reasons. First of all, I feel an unequal application of government and regulatory action is happening. Sony has arguably been the king of platform exclusives and acquiring companies, but their position in the UK market has created the appearance of special treatment. It’s always bad for an industry anytime companies receive special treatment or benefit disproportionately against competitors based on regional influence.

Then there’s the CMA’s argument that Microsoft is dominating cloud gaming and that this acquisition would increase its dominance in this space. In my opinion, this entire line of reasoning is nonsense and related to Sony’s fears of losing out as this platform continues to grow. The cloud gaming market is too nascent to declare that Microsoft has any sort of monopoly and things are changing rapidly.

As for the EU approving the deal, it’s a positive step forward and provides some ammunition to use in the UK CMA appeal. But there’s still a long road ahead. It also helps with the pending reviews of this deal in the US, which aren’t really getting underway until later this year. It’s safe to say that we’re still a long way from the final chapter of this story.

Many expected the UK’s Competition and Markets Authority to approve the Microsoft and Activision $68.7 billion merger. The regulatory agency had released a statement in March that it had dropped its concerns about whether or not Call of Duty would remain platform agnostic.

But timing is everything and there has been increased scrutiny on Big Tech firms, exemplified by the CMA’s “surprising” decision to block the merger. If regulators are willing to stop Microsoft’s biggest move, this indicates that they are willing to take a more aggressive stance against any M&A that they think will stifle competition. The CMA has said that Microsoft already has a 60-70% share of the cloud gaming market which is forecasted to be worth $13.7 billion globally by 2026 (up from $1.72 billion in 2021). So it makes sense that they are worried about how the union between a company with a proprietary cloud gaming service and one with some of the biggest IPs could impact an emerging market.

The CMA’s ruling is most certainly not the final word on the matter. Microsoft and Activision have said they are going to appeal the veto and while the European Commission accepted Microsoft’s proposed remedy, the CMA stands by its position that a free ten-year licence for any Activision game on any cloud gaming platform or device does not fully address their anti-competition concerns. The EU’s approval of the purchase might help Microsoft’s appeal in the UK, but based on historical precedent, it seems unlikely the CMA will overturn their decision.

The US still has to rule on the deal which it is seeking to block and if the the CMA upholds its veto, then it just might be the end of the road for the Microsoft and Activision merger – but I don’t think that will have any material impact on their ability to continue doing business as separate entities.

If the deal goes through, it will likely have ramifications that extend well beyond the consumer. In the long run, a consolidation of two companies the size of Microsoft and Activision often means fewer ingredients required for a competitive marketplace – fewer developers, fewer new entrants, fewer ideas, fewer job opportunities, and fewer choices all around.

Whether or not Microsoft wins the appeal or finds a workaround in the UK or the FTC approves the deal in the US, the subtext to Big Tech is this: M&A as a means of expanding into new markets is no longer a straightforward path to growth.

Previously: Microsoft Xcloud Program Manager

The CMA’s decision to block the Activision acquisition because of its cloud gaming advantage is unusually prescient for a government agency. Microsoft’s lead after Stadia’s failure and Luna’s mediocre performance leave only Sony and Nvidia to compete with. And cloud gaming is how Microsoft will go from 120 million monthly active players to a billion.

Ultimately, I think they’ll win on appeal because Phil Spencer wants Xcloud on every platform he can cut a deal for. Including Playstation and Switch, and it’s hard to argue that it’s bad for consumers.

That the CMA blocked the deal was not a surprise considering the size of the deal and the power it can give to Microsoft in the gaming industry, adding up to its current position in the console and distribution with its Xbox ecosystem. The CMA’s concern is that the acquisition could give Microsoft too much control over the market, limiting competition and innovation while potentially harming the consumer regarding pricing and terms of game access. Although Microsoft has always been a very open company (compared to some, such as Apple for example) working extensively on interoperability, it has also shown in the past very effective strategies to dominate markets (browser in its time or OS for PC for example) hence the fear of the CMA is justified.

Interestingly the CMA has justified the blocking because of the cloud gaming market which is a nascent market and this shows that the CMA has been forward-thinking in its judgement. Console exclusives have been a major topic in the past and the main driver for console sales and the CMA in this decision show its willingness to ensure equal access to content on all platforms, which is the promise of cloud gaming and the benefit the end-user can get from an open market.

In a way, it is a decision that can ensure that the majors of the past do not have too much of an advantage in the rapidly evolving gaming market and cloud gaming.

Contrary to the decision from the CMA, the EU decision was more of a surprise to me at first. But it is also more a local decision when you read the fine lines like the fact that “Even if Call of Duty is largely played on console, it is less popular in the EEA than in other regions of the world, and is less popular in the EEA within its genre compared to other markets”. Other aspects are more related to the competition in the gaming market and, in a way, tend to be more arguable such as the consideration that Microsoft would have no incentive to refuse to distribute Activision’s games to Sony for example.

Ultimately the EU made a similar analysis as the CMA did regarding cloud gaming and proposed remedies while greenlighting the operation, such as free licence to consumers in the EU and free licence to cloud gaming services, which is good for companies like Gamestream to protect the cloud gaming market and for innovation. However, the EU is maybe optimistic about this approach, while the CMA is more pragmatic and business minded.

Only time will tell if EU regulation can be enforced to ensure that Microsoft is indeed enabling Activision content on all platforms and that consumers can access its content on any platform. If so, it will be a good move for the gaming industry and gamers.

Avihay Hermon
Vice President of Business Development
Spring Games

The games industry is additive. Platforms don’t come on top of others but in addition to others. Consoles didn’t kill PCs, mobile didn’t, and the cloud won’t kill mobile or consoles. Instead, it will stand alongside them. Therefore, even if Microsoft dominates cloud gaming, it will be part of the ecosystem and compete with other forms of gaming. Sony dominates consoles, Tencent dominates mobile, and Microsoft might dominate the cloud. It doesn’t mean anything.

Cloud gaming is so far away that saying Microsoft is ahead of everyone equals analysing the lead in an F1 race after the first 400m. There will be so many changes and pivots along the way that no one can anticipate, not even the CMA. Microsoft was always open about sharing its games across all platforms. Microsoft owns the best-selling game in the world, and Minecraft is sold on PlayStation, mobile, Nintendo, and every other platform. They could easily make it an Xbox exclusive but chose not to.

Xbox is not aiming for the console market. Microsoft has always been a software company, and hardware is messy. CAPEX is a hungry market to work in. Xbox consoles seem like a loss leader in becoming a content platform. They want to make consoles as much as Netflix wants to manufacture TVs. Video games will become a massive player among GenZ and further ahead. That’s why all the FAANG are dipping their toes in video games and failing miserably.

Cloud will be a factor, but only in a certain market share. So CMA is correct with its cloud predictions but needs to be corrected with its market analysis.

Edited by Paige Cook 



Original Source Link

Related Articles

Back to top button