UK’s Competition and Markets Authority posted a press release titled: “Microsoft – Activision deal could harm UK gamers”. The press release starts with: A CMA investigation has provisionally concluded that Microsoft’s proposed acquisition of Activision could result in higher prices, fewer choices, or less innovation for UK gamers.
The provisional findings from the Competition and Markets Authority (CMA) follow a wide-ranging investigation conducted over the last five months to understand the market and potential impact of the deal. This has included holding site visits and hearings to hear directly from business leaders at Microsoft and Activision, analyzing over 3 million internal documents from the two businesses to understand their views on the market, commissioning an independent survey of UK gamers, and gathering evidence from a range of other gaming console providers, game publishers, and cloud gaming service providers.
Competition in the supply of cloud gaming services
The CMA provisionally found that being able to offer popular games will be important for cloud gaming providers to attract users as the market continues to grow and develop. The evidence available to the CMA currently indicates that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions). Microsoft already accounts for an estimated 60-70% of global cloud gaming services and also has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).
The CMA provisionally found that buying one of the world’s most important game publishers would reinforce this strong position and substantially reduce the competition that Microsoft would otherwise face in the cloud gaming market in the UK. This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC.
Competition in the supply of consoles
The CMA provisionally found that a small number of key games, including Call of Duty (CoD), Activision’s flagship game, play an important role in driving competition between consoles. The evidence available to the CMA, including data on how Microsoft measures the value of customers in the ordinary course of business, currently indicate that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own consoles (or only available on PlayStation under materially worse conditions). The CMA’s provisional findings note that this strategy, of buying gaming studios and making their content exclusive to Microsoft’s platforms, has been used by Microsoft following several previous acquisitions of games studios.
The CMA provisionally found that weakening competition by restricting the access that other platforms have to Activision’s games could substantially reduce the competition between Xbox and PlayStation in the UK, harming UK gamers.
Xbox and PlayStation compete closely with each other at present and access to the most important content like CoD, is an important part of that competition. Reducing this competition between Microsoft and Sony could result in all gamers seeing higher prices, reduced range, lower quality, and worse service in gaming consoles over time.
There is more in this press release, but I think the key points are listed above. The provisional results are clearly not in Microsoft’s favor.