Regulators in the UK looking into Microsoft’s proposed acquisition of Activision Blizzard changed their minds today and said they no longer thought the company would ban the Call of Duty video game franchise from Sony’s PlayStation platforms.
A merged Microsoft/Activision Blizzard would hurt console game competition, according to a tentative finding made last month by the UK Competition and Markets Authority (CMA). Microsoft would find it commercially advantageous to make Activision’s games exclusive to its own platforms (or only available on PlayStation under materially worse circumstances), the CMA stated at the time. The government expressed worries about how the combination might impact competitors in cloud gaming.
The early results were good news for Sony, which has repeatedly questioned Microsoft’s commitment to keeping Call of Duty titles available on PlayStation. However, Microsoft persuaded the CMA to change its opinion by arguing that the financial model was incorrect. The CMA stated in a statement today that it had “received a substantial amount of new evidence.”
After taking into account the new information, the CMA Panel Chair Martin Coleman stated, “We have now provisionally concluded that the merger will not result in a substantial lessening of competition in console gaming services because the cost to Microsoft of denying PlayStation access to Call of Duty would outweigh any benefits from taking such action.”
The CMA panel looking into the acquisition “updated its initial findings and reached the provisional conclusion that, generally, the transaction will not result in a material decrease of competition in regard to console gaming in the UK.”
Although specific dollar amounts were removed from the document’s public version, the amended conclusions stated that removing Call of Duty off PlayStation would result in “a considerable net financial loss for the Parties under all scenarios that we judged feasible.”
The CMA stated that Microsoft’s financial incentives to make Activision titles exclusive to Xbox systems relate to the “most substantial new evidence” provided to the agency, adding:
Although the CMA’s initial analysis suggested that this strategy would be profitable in the majority of cases, new data (which offers a more accurate picture of the actual purchasing habits of Call of Duty players) suggests that this strategy would be significantly loss-making in any scenario that is conceivable. Based on this, the updated study now demonstrates that making CoD exclusive to Xbox after the merger would not be profitable for Microsoft, and that Microsoft will instead still have a motivation to keep making the game available on PlayStation.
This could make it simpler for Microsoft to obtain UK regulatory permission for the merger, though it will still need to persuade authorities that it won’t hinder competition in the cloud gaming market.
“Today’s news has no bearing on our preliminary conclusion that this transaction raises questions about the state of the cloud gaming market. By the end of April, our inquiry will be over, according to Coleman.
Evidence “indicates that Microsoft would find it commercially advantageous to make Activision’s games exclusive to its own cloud gaming service,” according to the CMA’s provisional conclusions from last month (or only available on other services under materially worse conditions). Microsoft owns Xbox, the most popular PC operating system (Windows), a global cloud computing infrastructure (Azure and Xbox Cloud Gaming), and an estimated 60 to 70 percent of all cloud gaming services worldwide. They also have other significant capabilities in cloud gaming.
The CMA stated that by purchasing Activision Blizzard, “would strengthen this dominant position and significantly lessen any competition that Microsoft might otherwise face in the UK market for cloud gaming. Future gamers in the UK, especially those who cannot afford or do not want to purchase an expensive gaming console or gaming PC, could be harmed by this change in the gaming industry.”
In response, Microsoft informed the CMA that there was “little evidence that Activision content would have been a significant input for cloud gaming providers” and that “Activision games would not have been offered to cloud gaming services without the Merger.” Additionally, Microsoft stated that the license remedies it had suggested would “guarantee widespread access of CoD and other Activision products on cloud gaming platforms.”