“ Microsoft can still very well prevail. That would mean formulating a specific version of Game Pass exclusively for the UK that does not offer any of the Activision titles. ”
Not to repeat this point too often, but there really is a fairly poor understanding of the CMA. It will not be possible to simply swerve the CMA by implementing the approach above, the acquisition will still fall under the remit of the CMA and given their preference for structural remedies I wouldn’t bet on it being accepted.
- "Historically the introduction of novel distribution channels, revenue models, and platforms has made the pie larger. Innovations in gaming don’t take from existing successes but build on them and expand the range of options available to consumers and creatives."
Completely devoid of market reality. New models can absolutely cannabilize existing models. F2P has squashed B2P MP. We know GP cannabilizes B2P sales as well.
A hilarious conflating of one company as the entire market. Cloud can absolutely be a novel distribution channel that grows the pie but MSFT does not represent the entire cloud gaming industry. Trying to spin an entire industry's future on a single company is not the gotcha you think it is to anti-trust regulators.
- "For one, the publisher does not offer any subscriptions to its catalog, nor does it provide cloud access to any of its titles. Team Kotick has shown no interest in the model"
The CMA has seen millions of internal documents. They have cited pages and pages of internal ATVI docs on ATVI intending on putting titles to streaming/sub services.
Yet you think your hunches have the same weight for exactly what reason?
- "With the regulator’s decision, UK Consumers will have less access and continue to pay more for premium content like Call of Duty."
And that's ATVI's decision. It is what it means when you have a diverse and competitive market, for companies to have different goals, versus one where the biggest companies force others to adopt business models that would be unfeasible without extreme consolidation.
- "Anyway, I could burn down more of the CMA’s forest of deadwood arguments, but the focus is its expectation that the UK market will benefit from the artificially enforced competition."
More independent economic players is not artifical competition, its an inherent increase in competition. This is basic economic fact.
Burning? You're hardly making a spark here.
- "In mobile, Apple and Google would have had to contend with a much more formidable competitor."
I don't think anyone fears MSFT's mobile store with such amazing consumer hits like Bing, Outlook and LinkedIn.
Nor is the solution of duopolies to allow further consolidation in other markets and create an oligopoly. Like this is parody levels of thinking here.
- “We should probably look at Microsoft’s share of the console market in Japan and wonder why that is. Maybe they should actually start competing more. I hope that regulators take an approach that is truly beneficial to gamers and publishers.”
Probably has to do with Xbox's atrocious marketing and poor game lineup for Japanese consumers but that's too inward looking for Satya isn't it?
- "What Ryan probably does not want is having to pay more for the franchise when it expires in 2024. Currently valued at $400 million a year in income, Sony has done itself a massive disservice by raising such a stink."
Nonsense. Sony have massively won, as has the consumer and workers, the stock shot up 4% on the news alone.
Also, I would love to see this fantasy scenario, where by the time 2025 comes, PS5 at 85M, Xbox at 35M, where Activision decides to disincentivise 50%+ of its COD playerbase. Sony might lose $100M or so from higher costs, but ATVI will lose a lot, lot more ($1.3B revenue from Sony), especially if Sony decides to park that money and advertising into a rival like EA.
Your analysis does not even remotely get into the CMA's thesis, how MSFT has structural advantages in many parts of the vertical stack, including an OS monopoly and Cloud oligopoly, how MSFT's contract clauses are deeply anti-competitive, how it has shown every incentive to foreclose, or the more common points like how Sony and Nintendo built themselves internally with far more risk, while MSFT, with all the money in the world is too incompetent to do that.
And that's really the crux of the issue here. MSFT is too incompetent to make their own hit IP, too bad at global distribution and support, and so everyone has to give poor little MSFT an $80B allowance to get "even". Give me a break. I expected much better from someone who analyses this industry with data.
Oh and you're also wrong on a lot of points pertaining to anti-trust law, but most seriously the consequence of a CMA block. MSFT and ATVI have to either obey by the final CMA ruling of not merging their companies or cease to do business there. It is the Law.
And yes, the CMA does have the power to kill global deals, as does the EU, US and even China for some businesses.
Short, sweet, and now I don't have to [✄] my brain trying to read a 418-page report. Perhaps, the CMA just got their AI to ‘hallucinate’ their decision. Maybe even the evidence too? I guess they need a better algorithm then. Great report as always!
Wish I could like this twice. Regulatory action based on the imminent success of a hypothetical market that doesn't exist sets up a pernicious precedent for future decisions.
This is such a great piece on the subject, and why I turn to you for this sort of analysis instead of Polygon or IGN.
My biggest concern isn’t so much the acquisition but what MS does with its studios. I was very pro gamepass but I just played an hour or two of Redfall and it’s such a disappointment I’m starting to worry that MS doesn’t know what to do with a studio once it owns it.
“ Microsoft can still very well prevail. That would mean formulating a specific version of Game Pass exclusively for the UK that does not offer any of the Activision titles. ”
Not to repeat this point too often, but there really is a fairly poor understanding of the CMA. It will not be possible to simply swerve the CMA by implementing the approach above, the acquisition will still fall under the remit of the CMA and given their preference for structural remedies I wouldn’t bet on it being accepted.
- "Historically the introduction of novel distribution channels, revenue models, and platforms has made the pie larger. Innovations in gaming don’t take from existing successes but build on them and expand the range of options available to consumers and creatives."
Completely devoid of market reality. New models can absolutely cannabilize existing models. F2P has squashed B2P MP. We know GP cannabilizes B2P sales as well.
A hilarious conflating of one company as the entire market. Cloud can absolutely be a novel distribution channel that grows the pie but MSFT does not represent the entire cloud gaming industry. Trying to spin an entire industry's future on a single company is not the gotcha you think it is to anti-trust regulators.
- "For one, the publisher does not offer any subscriptions to its catalog, nor does it provide cloud access to any of its titles. Team Kotick has shown no interest in the model"
The CMA has seen millions of internal documents. They have cited pages and pages of internal ATVI docs on ATVI intending on putting titles to streaming/sub services.
Yet you think your hunches have the same weight for exactly what reason?
- "With the regulator’s decision, UK Consumers will have less access and continue to pay more for premium content like Call of Duty."
And that's ATVI's decision. It is what it means when you have a diverse and competitive market, for companies to have different goals, versus one where the biggest companies force others to adopt business models that would be unfeasible without extreme consolidation.
- "Anyway, I could burn down more of the CMA’s forest of deadwood arguments, but the focus is its expectation that the UK market will benefit from the artificially enforced competition."
More independent economic players is not artifical competition, its an inherent increase in competition. This is basic economic fact.
Burning? You're hardly making a spark here.
- "In mobile, Apple and Google would have had to contend with a much more formidable competitor."
I don't think anyone fears MSFT's mobile store with such amazing consumer hits like Bing, Outlook and LinkedIn.
Nor is the solution of duopolies to allow further consolidation in other markets and create an oligopoly. Like this is parody levels of thinking here.
- “We should probably look at Microsoft’s share of the console market in Japan and wonder why that is. Maybe they should actually start competing more. I hope that regulators take an approach that is truly beneficial to gamers and publishers.”
Probably has to do with Xbox's atrocious marketing and poor game lineup for Japanese consumers but that's too inward looking for Satya isn't it?
- "What Ryan probably does not want is having to pay more for the franchise when it expires in 2024. Currently valued at $400 million a year in income, Sony has done itself a massive disservice by raising such a stink."
Nonsense. Sony have massively won, as has the consumer and workers, the stock shot up 4% on the news alone.
Also, I would love to see this fantasy scenario, where by the time 2025 comes, PS5 at 85M, Xbox at 35M, where Activision decides to disincentivise 50%+ of its COD playerbase. Sony might lose $100M or so from higher costs, but ATVI will lose a lot, lot more ($1.3B revenue from Sony), especially if Sony decides to park that money and advertising into a rival like EA.
Your analysis does not even remotely get into the CMA's thesis, how MSFT has structural advantages in many parts of the vertical stack, including an OS monopoly and Cloud oligopoly, how MSFT's contract clauses are deeply anti-competitive, how it has shown every incentive to foreclose, or the more common points like how Sony and Nintendo built themselves internally with far more risk, while MSFT, with all the money in the world is too incompetent to do that.
And that's really the crux of the issue here. MSFT is too incompetent to make their own hit IP, too bad at global distribution and support, and so everyone has to give poor little MSFT an $80B allowance to get "even". Give me a break. I expected much better from someone who analyses this industry with data.
Oh and you're also wrong on a lot of points pertaining to anti-trust law, but most seriously the consequence of a CMA block. MSFT and ATVI have to either obey by the final CMA ruling of not merging their companies or cease to do business there. It is the Law.
And yes, the CMA does have the power to kill global deals, as does the EU, US and even China for some businesses.
Short, sweet, and now I don't have to [✄] my brain trying to read a 418-page report. Perhaps, the CMA just got their AI to ‘hallucinate’ their decision. Maybe even the evidence too? I guess they need a better algorithm then. Great report as always!
Bang-on analysis Joost. As always. 💪
Wish I could like this twice. Regulatory action based on the imminent success of a hypothetical market that doesn't exist sets up a pernicious precedent for future decisions.
Karim, you should your likes count for more than twice.
This is such a great piece on the subject, and why I turn to you for this sort of analysis instead of Polygon or IGN.
My biggest concern isn’t so much the acquisition but what MS does with its studios. I was very pro gamepass but I just played an hour or two of Redfall and it’s such a disappointment I’m starting to worry that MS doesn’t know what to do with a studio once it owns it.
Thanks, Teagan!
Great read Joost!!
Thank you Dave