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Wednesday, April 26, 2023

Competition and Markets Authority (UK) Blocks Microsoft Acquisition of Activision

By LUDWIG VON KOOPA - Based on... cloud gaming? Huh?

The Federal Trade Commission in the United States isn't the only overzealous and biased regulatory authority on Earth. There is the United Kingdom's Competition and Markets Authority, too. I praised them in ending predatory auto-renewal practices on the console manufacturers’ subscription products. But now I'll condemn the CMA for condemning Microsoft's attempted acquisition of Activision Blizzard King on the basis of supposedly protecting innovation and consumer choice in... cloud gaming.

The CMA had two concerns: Number one, Microsoft owning the Call of Duty IP would make the Xbox too OP compared to Sony's PlayStation. (Those stand for intellectual property and overpowered.) And number two, Microsoft's lead in the cloud gaming market would become insurmountable with the power of Activision Blizzard King. It turns out that Microsoft has successfully convinced the Competition and Markets Authority that Call of Duty wouldn't suddenly boost Microsoft's third-place out of three position in the console market to an overwhelming dominant player. (It also helps that Call of Duty will be available on Nintendo platforms, but only if the merger goes through, because Activision wouldn't do that if they were in control of their own destiny.)

However, they are definitely of the belief that the “fast-growing cloud gaming market” would be harmed, mainly based on the false belief that Microsoft would only allow Activision Blizzard King's titles on Microsoft's own Xbox cloud gaming service, when Microsoft has already signed an agreement with NVIDIA for some of those titles to be on NVIDIA's cloud service (NVIDIA GeForce Now), too. The CMA also stated that they have evidence to support that Activision, if they're not acquired, will put their games up on everyone's cloud platforms in the future. If that evidence exists, we haven't seen it, and all other statements and history and evidence indicates that Activision is NOT interested in doing that and would rather keep their games off anyone's cloud service. Activision themselves have stated that directly to the CMA, stating that cloud gaming is antithetical to Activision Blizzard King's growth strategy and the limitations of the medium would be bad for games like Call of Duty that would fall apart under the latency and loading times common to cloud gaming. Activision prefers local processing. Basically, Microsoft is forcing Activision to participate outside of its comfort zone by acquiring it. ...Or, that would happen, if they weren't being blocked. The CMA observed a few rejected pro-cloud brainstorming internal documents and has mistaken that for Activision's true policy and plans going forward.

Microsoft had a lengthier response to the CMA about the idea that the acquisition would be harmful to customers of consoles and cloud gaming. The CMA has a wildly optimistic projection of how important cloud gaming currently is and how important it will become in a few years, but Microsoft documents suggest they have much lower expectations. In order for the CMA to rationally reject the deal, they need to not complain about how well-positioned Microsoft is in the cloud gaming space, but the fact that Activision's presence would shut out competitors compared to a world without Activision's presence, and that analysis is never done by the CMA and it's absurd to think that. Basically, they believe that cloud gaming will replace the traditional physical and digital download console experience, and people won't have to buy consoles or even PCs anymore in a few years. But this future will only happen if the cloud market is allowed to develop through market forces. ...I mean, that's not going to happen either way, because gamers don't want that.

Meanwhile, throughout all of this, Microsoft is saying their objective is to create an Xbox mobile distribution service (Xbox Mobile Platform) to challenge Google and Apple's duopoly (which would help the mobile market... a lot), but they need Activision Blizzard King's existing assets to be in the position to do so.

Microsoft has also proposed a remedy of an open (royalty-free) streaming licence for Activision PC games, basically meaning non-NVIDIA cloud streamers that can integrate with PC game stores will be able to play Activision games on their cloud streaming. As far as I can tell, the CMA's response to this was to reject it, because this would require someone at the CMA to put actual effort into regulating the industry to make sure Microsoft is upholding their end of the deal. They also believe that those cloud platforms wouldn't cover the full scope of possibilities that cloud gaming can go in the next decade, so because of that uncertainty, they don't like Microsoft's idea and would prefer to keep the options open.

Microsoft, for its part, plans to appeal. I wish them success.

Do YOU think that cloud gaming will completely transform and revolutionise the videogame industry within the next five years, and become the distribution method of choice for gamers across the world? If so, you might be a CMA employee, and maybe you wouldn't want to comment on KoopaTV. Well, if you are willing to do that, the site is willing to hear you out!

The European Commission approved of the acquisition.

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