A few weeks ago, the UK Competition and Markets Authority (CMA) announced it was blocking Microsoft’s acquisition of Activision-Blizzard citing concerns with potentially reduced cloud gaming competition. The EU Commission has now also ruled and is clearing Microsoft’s acquisition of Activision-Blizzard after Microsoft made some guarantees surrounding cloud gaming.
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After opening an investigation into the acquisition back in November 2022 after it was announced, the EU also had similar concerns as the CMA when it came to competition in the relatively new cloud gaming space. There’s no arguing that Microsoft has a leg up with its cloud game streaming included with Game Pass Ultimate, but the company was willing to strike a deal which allowed the EU’s approval to move forward.
“Video games attract billions of users all over the world. In such a fast-growing and dynamic industry, it is crucial to protect competition and innovation. Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before thanks to cloud game streaming. The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth.”
Margrethe Vestager, Executive Vice-President in charge of competition policy – 14/05/2023
In summary, the EU Commission found that “Microsoft would not be able to harm rival consoles and rival multi-game subscription services. At the same time, it confirmed that Microsoft could harm competition in the distribution of games via cloud game streaming services and that its position in the market for PC operating systems would be strengthened.”
As a result, Microsoft offered a free license to consumers in the EEA that would “allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license.” Currently, there are no deals between Activision or cloud game streaming services to stream their games which include Call of Duty, Diablo, World of Warcraft, Overwatch, and others.
The Commission also made some other interesting observations:
- Microsoft would have no incentive to refuse to distribute Activision’s games to Sony, which is the leading distributor of console games worldwide, including in the European Economic Area (‘EEA’) where there are four Sony PlayStation consoles for every Microsoft Xbox console bought by gamers. Indeed, Microsoft would have strong incentives to continue distributing Activision’s games via a device as popular as Sony’s PlayStation.
- Even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market. Even if Call of Duty is largely played on console, it is less popular in the EEA than in other regions of the world, and is less popular in the EEA within its genre compared to other markets. Therefore, even without being able to offer this specific game, Sony could leverage its size, extensive games catalogue and market position to fend off any attempt to weaken its competitive position.
- Even without this transaction, Activision would not have made its games available for multi-game subscription services, as this would cannibalize sales of individual games. Therefore, the situation for third-party providers of multi-game subscription services would not change after the acquisition of Activision by Microsoft.
- The acquisition would harm competition in the distribution of PC and console games via cloud game streaming services, an innovative market segment that could transform the way many gamers play video games. Despite its potential, cloud game streaming is very limited today. The Commission found that the popularity of Activision’s games could promote its growth. Instead, if Microsoft made Activision’s games exclusive to its own cloud game streaming service, Game Pass Ultimate, and withheld them from rival cloud game streaming providers, it would reduce competition in the distribution of games via cloud game streaming.
- If Microsoft made Activision’s games exclusive to its own cloud game streaming service, Microsoft could also strengthen the position of Windows in the market for PC operating systems. This could be the case, should Microsoft hinder or degrade the streaming of Activision’s games on PCs using operating systems other than Windows.
With the EU Commission’s approval, which represents 27 European countries, it seems likely that Microsoft will use the concessions and commitments it made with the EU in its appeal to the CMA’s decision. However, the CMA seems to be standing fast behind it’s decision with a recent tweet:
Of course, there’s still the FTC that Microsoft has to face in the U.S. and all reports are indicating an unfavourable ruling from that commission.
What do you think about the EU decision with regard to Microsoft’s acquisition of Activision-Blizzard? Do you think this will help with the company’s appeal to the CMA in the UK? Let us know on social media by using the buttons below.
