Last week, the Federal Trade Commission (FTC) announced that it would seek to block Microsoft’s planned acquisition of gaming giant Activision Blizzard. In announcing its decision, the Commission alleged that the landmark deal would allow Microsoft to “suppress competition to rival gaming consoles,” subscriptions and cloud-based gaming services. In reality, the merger would deliver a major victory to consumers, who are likely to see significant benefits like expanded access, a greater selection of games and lower prices.
Ever since Microsoft announced the deal last January, discussions have swirled over whether the FTC would intervene to stop it. Current FTC Chair Lina Khan has previously expressed an interest in taking a more aggressive approach to tackling what she sees as anticompetitive behavior by major companies, particularly Big Tech. Lodging a formal complaint against Microsoft takes things to a whole new level, with potentially devastating consequences for consumers who only stand to gain from the deal.
The proposed merger would greatly expand consumer access to content by consolidating popular Xbox and Activision games in one place under Microsoft’s subscription streaming service. At present, consumers must choose between several gaming consoles when purchasing a game due to the high unit price associated with each. This system limits their access to just a handful of titles and acts as an unnecessary barrier to consumer choice. Microsoft’s subscription streaming service changes this calculus and opens up a host of new opportunities.
Microsoft’s new subscription streaming service would allow consumers to choose between one of three major subscription packages including the standard “Xbox Game Pass, “PC Game Pass” and the more expensive “Game Pass Ultimate,” which includes all of the benefits of the Xbox and PC passes, as well as the ability to stream all of these games via the cloud.
Microsoft’s long-term plan is to build a space where consumers can, for the price of a small subscription fee, join a vast online gaming network. This network of gamers will be made possible by a sophisticated cloud software system that allows users to access games on a variety of devices, including phones, tablets and laptops.
All these benefits would come with considerable cost savings to consumers, who would no longer have to purchase multiple game consoles to play their favorite games.
Despite the many benefits that the deal would provide consumers, the FTC has chosen to try to block the merger. The FTC remains concerned about the large price tag of the acquisition and that the deal may provide Microsoft with an unfair advantage in the video game market.
These concerns are overblown. While the deal is indeed large, it would only make Microsoft the third-largest gaming company in the world by revenue, behind Tencent and Sony. According to data analytics firm Newzoo, this shift would give Microsoft a 10.7% share of the video game market, up only slightly from 6.5% in 2020. While that increase is not insignificant, it’s far from what would be necessary to dictate prices or harm competition.
Moreover, Microsoft remains, first and foremost, a technology company that sells a large range of products including computers, electronics, cloud services and computer software. A small foothold in the video game market wouldn’t change that.
Microsoft has also stated on more than one occasion that it plans to honor all of Activision Blizzard’s prior agreements to keep popular titles like Call of Duty available on other consoles like Sony’s PlayStation, which serves as a major competitor to Xbox. According to the New York Times, the tech corporation recently offered Sony access to the game for the next 10 years. These pledges should reassure critics who have voiced concerns about the dangers of console exclusives and a decline in overall market competitiveness.
All this information makes it grossly unfair to characterize Microsoft’s proposed acquisition of Activision Blizzard as anticompetitive. While a deal of this scale is always bound to court controversy, there’s simply no evidence to suggest that consumers would be harmed as a result. On the contrary, consumers will likely benefit immensely from unit cost savings and expanded access to a wider selection of games. The FTC would be wise to consider these facts before issuing further baseless complaints.
Nate Scherer is a Policy Analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us on www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.