The UK regulator has a lot to say about Microsoft’s proposed Xbox and Activision deal which has made headlines for over a year now. However, the latest concerns are not a good sign for the company that aims to take over Activision Blizzard soon. The UK regulator is a key player in the deal and if the council isn’t happy with the effects the purchase can have on gaming, Microsoft will have to call the sale off.
The CMA says that the deal between Microsoft and Activision will definitely harm the PlayStation brand which we already know. However, other concerns now include harmful impacts on other multi-game subscriptions not hosted by Microsoft. The CMA says that Microsoft will knowingly withhold Activision Blizzard content from other services including Google Stadia, Amazon and NVIDIA which all have game streaming platforms.
“There is a realistic prospect of a substantial lessening of competition in gaming consoles, multi-game subscription services, and cloud gaming services,”
The CMA goes on to explain that a major “network effect” will also take place if the purchase is approved. This is described as a situation where a platform attracts a lot of gamers, more than others. The firm is concerned that the acquisition of Call of Duty and other Activision IPs will create a sizeable network effect on Microsoft’s platform.
The firm says that if Microsoft has control over Activision’s library, in addition to its strong position in console gaming, cloud services, operating systems and other platforms, it could result in Microsoft harming consumers by impairing Sony’s offerings.
“Microsoft’s closest gaming rival – ability to compete as well as that of other existing rivals and potential new entrants who could otherwise bring healthy competition through innovative multi-game subscriptions and cloud gaming services.”
The CMA mentions that even the exclusivity of all Activision Blizzard’s games going to one subscription service (Xbox Game Pass) is a major concern and doesn’t make sense from a competitive point of view.
“The CMA recognises that ABK’s newest games are not currently available on any subscription service on the day of release but considers that this may change as subscription services continue to grow. After the Merger, Microsoft would gain control of this important input and could use it to harm the competitiveness of its rivals.”
Microsoft’s current xCloud service would also substantially grow with these games being exclusive to the platform. This is also seen as harmful to the industry. The CMA says this purchase would give Microsoft an unparalleled advantage” over other cloud streaming providers.
Microsoft has since commented on the concerns. The company doesn’t believe the CMA’s issues with the deal are justified. It also believes that the “theories of harm” aren’t sufficient enough to warrant the purchase being investigated for the second time.
The company has also called out Sony in the statement saying that PlayStation’s position in the industry has seen the company conduct practices such as raising the price of its console without fear of losing market share. This was only possible due to Sony’s 150 million player base in comparison to Microsoft’s 63 million.
The company says that even if every single Call of Duty player on Sony’s console would switch to Xbox, the PlayStation gamer base will still remain bigger than Xbox’s. The statement reads:
“The suggestion that the incumbent market leader, with clear and enduring market power, could be foreclosed by the third largest provider as a result of losing access to one title is not credible. In short, Sony is not vulnerable to a hypothetical foreclosure strategy, and the Referral Decision incorrectly relies on self-serving statements by Sony which significantly exaggerate the importance of Call of Duty to it and neglect to account for Sony’s clear ability to competitively respond,”
Microsoft says Sony has “the ability to adapt and compete”. The company says gamers will ultimately benefit from this increased competition and choice.
“Should any consumers decide to switch from a gaming platform that does not give them a choice as to how to pay for new games (PlayStation) to one that does (Xbox), then that is the sort of consumer switching behavior that the CMA should consider welfare enhancing and indeed encourage. It is not something that the CMA should be trying to prevent.”