Microsoft-Activision, after the no of the UK Authority what will happen now?
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Microsoft didn’t take it well. He said through his vice president Brad Smith that they will present an appeal against the decision of the British Competition and Markets Authority (CMA) against the acquisition of Activision-Blizzard and threatened to cut investments in the UK. We are talking about a 69 billion dollar operation that is on the table of the authorities of Europe and the United States and promises to change the shape and substance of the world video game industry. Before expressing an opinion on what appears to all intents and purposes as bad news for Microsoft but above all for the shareholders of Activision-Blizzard, it is good to go into the merits of the Cma’s decision.
What does the CMA claim?
The problem is not the possible monopoly on the console market which is dominated by its competitor Playstation. But the cloug gaming, i.e. the game market “transmitted” in streaming that enters smartphones, PCs and consoles without the need for dedicated hardware and through all-you-can-eat subscription forms. The number of monthly active users for cloud gaming in the UK more than tripled between the start of 2021 and the end of 2022, with the industry forecast to be worth £1bn by 2026 (and up to £11bn pounds globally). In this context, Microsoft already represents about 60-70% of global cloud gaming services and being the owner of the PC operating systems of the global cloud computing infrastructure (Azure and Xbox Cloud Gaming) it can certainly play a leading role. floor.
Comparison with Netflix
It has previously compared itself to Netflix in the early 1990s when there was Blockbuster and physical DVD distribution chains. And the example is correct because the advantage that the compression algorithm had over its competitors is what Microsoft has on the Cloud infrastructure. The existence of Netflix at the time did not stifle market innovation which in the space of a few decades saw the entry of most content producers into streaming. However, the acquisition of Activision Blizzard brings titles such as Call of Duty, Diablo, Warcraft, Candy Crush. It’s as if Netflix had bought half of Hollywood in those years. And this is one of the fears expressed by the British authority, namely that in cloud gaming there is no room for new subjects, that Microsoft, thanks to these contents and a very advantageous formula such as the game pass, could strangle any new initiative in the cradle. Let’s say that the most innovative aspect of this decision is that of having correctly focused on technology and not on the market, overcoming an ancient limitation of the Antitrust when confronted with the logic of digital. However, those who know and study the video game market are not convinced that blocking the operation could make the market more innovative.
What could Microsoft do now?
According to the analyst Michael Pachter at this point Microsoft could modify the Game Pass and make sure that it does not include content from Activision in the United Kingdom until it has satisfied all the requests of the CMA. In other words, Microsoft could still get CMA approval if it agrees to keep Activision Blizzard games out of Xbox Game Pass in the UK. However, Patcher is convinced that in the end Microsoft will win and could even decide to divest from the UK market. Especially if the other two Authorities were to give a positive opinion on the operation. In any case, the Cma’s decision was not something expected. Also because Microsoft thought it had defused Britain’s cloud gaming concerns by signing 10-year cloud gaming deals with Boosteroid, Ubitus and Nvidia to allow Xbox PC games to run on these rival cloud gaming services. These 10-year deals also include the access to Call of Duty and other Activision Blizzard games, if the deal is approved by regulators. However, these moves were not judged sufficient.
What happens now?
At this point the next stage is May 22 when the EU decision will be announced. The next Federal Trade Commission (FTC) meeting that could reveal more is expected in August. Regulators Regulators in Saudi Arabia, Brazil, Chile, Serbia, Japan and South Africa have all approved the deal. According to Reuters, the agreements signed with Nvidia and before that with Nintendo should push towards approval.
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