The UK’s antitrust watchdog has narrowed its probe of Microsoft’s $68.7 billion bid for video game giant, Activision Blizzard, to focus on whether the deal would hurt competition in the video game market. The investigation is still ongoing, and Microsoft has not yet responded to the probe’s initial requests for information. If found guilty of harming competition, Microsoft could face stiff penalties from the UK authorities.
Today, the Competition and Markets Authority (CMA) updated its provisional conclusion that the proposed merger between Microsoft and Skype could harm UK gamers through higher prices, fewer choices, or less innovation. The new evidence apparently alleviates these concerns in relation to the supply of games consoles in the UK. This may be good news for Microsoft and Skype investors, but it’s still unclear how this will play out in terms of the future of gaming in the UK.
Although the proposed deal between Nvidia and AMD is being scrutinized, there are still significant concerns that cloud gaming may be adversely affected. The investigation is ongoing, but a final report is due by April 26, 2023.
The CMA has updated its findings on the Sony PlayStation Network and PSVita Competition Case, finding that the transaction will not have a substantial lessening of competition in console gaming in the UK. This news comes as a relief for both consumers and game developers, as it clears an unknown path for future console releases.
The CMA’s updated analysis indicates that it would not be in Microsoft’s best interest to make Call of Duty exclusive to Xbox following the purchase. While this strategy may have been profitable in the past, new data suggests that it would be a significant loss for the company under any plausible scenario. Consequently, Microsoft will still have an incentive to keep CoD available on PlayStation platforms.
When Microsoft responded to the CMA’s preliminary findings, they argued that if it implemented a withholding strategy, by making CoD exclusive to their own games console, they would forego substantial revenue from the title on Sony’s PlayStation. This suggests that Microsoft is currently more concerned with maintaining control over CoD than maximizing its potential revenu
It is possible that the CMA’s financial modelling has made an error, as their calculations seem to be based on a five-year gross profit figure while losses are calculated just for a single year. When this error is corrected, it becomes clear there is no incentive to withhold services in order to supposedly gain an advantage over Xbox in the market.
Hence, it’s possible that Microsoft is withholding its financial incentives from other consoles to gain an edge in the market. This new evidence suggests that, if the company withheld its bonuses from rival games consoles, they would significantly lose out in terms of sales. As a result, the CMA now has taken a provisional view that this is not a competition concern.
The CMA found that Microsoft’s financial incentives to make Activision’s games exclusive to Xbox would be a loss-making under any plausible scenario, and this new data indicates that the strategy would not be commercially beneficial. This means that the deal between Microsoft and Activision will still not result in an Xbox exclusivity for Call of Duty.
One of the biggest concerns about the proposed merger between Microsoft and Nokia is that it could give too much power to Microsoft in the world of cloud gaming, which would mean that it could unfairly compete with other companies such as Amazon and Google. In a statement released yesterday, the UK’s regulator said that they have not revised their concerns about how this deal would impact cloud gaming, and they are “continuing to carefully consider [the] responses provided in relation to the original provisional findings.” This suggests that the regulators still believe there are potential problems with how this merger would affect competition in this area.
The independent panel of experts conducting the CMA investigation recently released a statement that stated they are not yet confident enough in their conclusions to issue a final report. This is despite having collected a large amount of data and interviewed numerous individuals. The panel is still exploring different options for how to improve their report, but until they are confident in the findings, they will not release it.
Provisional findings are a key aspect of the merger process and are explicitly designed to give the businesses involved, and any interested third parties, the chance to respond with new evidence before we make a final decision.
Having considered the additional evidence provided, 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 withholding Call of Duty from PlayStation would outweigh any gains from taking such action.
Our provisional view that this deal raises concerns in the cloud gaming market is not affected by today’s announcement. Our investigation remains on course for completion by the end of April.
The provisional findings contained in the ECFR report suggest that the merger would be likely to have a positive impact on both companies. They say that while some challenges may still exist, these can be overcome through cooperation and coordination between the two companies.
Microsoft believe that withholding Call of Duty from PlayStation would be a worthwhile endeavour, as it would allow them to maintain their market share and continue to profit from the game’s high demand. However, they recognize that doing so would result in a substantial lessening of competition in console gaming services, as rival companies such as Sony would be able to offer a similar service at no cost to their customers.
Initially, analyst reactions to the proposed Microsoft-NVIDIA deal were favorable. The cloud gaming market is growing rapidly and both companies have strong positions in this rapidly expanding market. However, after today’s announcement of new restrictions on hardware sales to the Chinese market, concerns have arisen that this deal could violate anti-monopoly laws in China. If proven guilty, Microsoft and NVIDIA could face fines or even imprisonment. This raises serious questions about the validity of the cloud gaming market and its future growth potential.
Apparently, Microsoft does not think that the issues concerning cloud gaming are “misplaced”. In its response to the provisional findings, Microsoft argued that ten-year licensing agreements between it and Nintendo and NVIDIA will mean that UK gamers stand to benefit “significantly” if it is allowed to become the owner of Activision. It is clear from this response that Microsoft is working hard to ensure that its interests are represented in any potential agreement between Activision and the CMA.
The company has yet to provide a statement on the issue, but it is clear that they are looking into what could have caused the issue. They are also in contact with their IT team to see if they can find any clues as to what may have gone wrong.
