The United Kingdom’s (UK) Competition and Market Authority (CMA) recently announced they were blocking Microsoft’s acquisition of video game company Activision. The CMA argued that blocking the acquisition was necessary to preserve competition in the developing cloud gaming market. In doing so, UK regulators misunderstand market dynamics and potentially reduce consumers’ access to game libraries.
The merger has been reviewed by regulators across the globe but the CMA is the first to decidedly block the merger. Even with the unique decision the CMA mirrors other regulatory bodies, like the Federal Trade Commission (FTC), which also took issue with the planned merger because of concerns about Microsoft’s growing role in cloud gaming.
The tech company which produces the gaming console Xbox and the multigame subscription service Game Pass currently allows certain subscribers access to games from the cloud with the ability to stream the game to external devices. The acquisition of Activision, which owns several major gaming franchises such as Call of Duty, World of Warcraft, and Diablo, would allow these titles to be added to the cloud library.
The CMA statement is primarily focused on the concern that Microsoft will use Activision and their massively popular games to dominate the cloud gaming market by luring in gamers for content, not through competitive streaming services.
However, with an emerging market like cloud gaming, where to draw the line to measure competitiveness is an open question. Some argue that while different companies such as Nvidia use the same technology, they provide their services differently enough from Xbox Game Pass, and other competitors like Amazon Luna, to be considered different markets. This confusion shows that cloud gaming is not an established market, and it is unclear how consumers will interchange these products.
The CMA recognizes some of these differences in its section on monetization models. Game Pass offers cloud gaming through a multigame subscription model, like Netflix for games, as does Amazon Luna. This lets users play a wide variety of games without having to purchase each one individually. In contrast, Nvidia’s GeForce Now allows gamers to play games already purchased from another store on their servers. While similar technology facilitates cloud gaming across different business models, there is still debate about whether these differences justify being considered different markets.
In addition to market definitions, there are concerns by the FTC and CMA that Microsoft intends to make Activision games exclusive to their platforms. It’s an understandable concern as Microsoft announced that future Bethesda titles such as Starfield will be Microsoft exclusives after Microsoft acquired their parent company ZeniMax Media, meaning the games will not be available on PlayStation.
Microsoft has been working to assuage these concerns and earlier this year Microsoft signed a deal with Nvidia to make Activision’s games for PC available through Nvidia’s cloud service in exchange for Nvidia’s support for the merger. In addition, Microsoft also made a deal with Nintendo to bring Call of Duty to Nintendo’s systems for the next ten years and has offered a similar deal to Sony, which makes PlayStation consoles. These binding agreements show that at least in the short-term Microsoft intends to bring Activision’s games to as many users as possible.
Rather than limiting access, their expansion of cloud gaming would increase competition among devices. The cloud gaming subscription for Microsoft’s Xbox Game Pass allows users to play games on a variety of platforms including Xbox, PC, smartphones, and even some smart TVs. By bringing more games to more devices, the acquisition would expand access to Activision’s games to players across more devices.
Blocking the Microsoft Activision acquisition demonstrates, just as the FTC did with its statement, a lack of understanding of the gaming market and interchangeability among devices. The CMA is needlessly punishing big tech mergers despite binding agreements. Concerns about the state of the cloud gaming market should be weighed against the benefits of expanding Activision’s games to more consumers and devices.
Trey Price is a technology policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information, visit https://www.theamericanconsumer.org/ or follow us on Twitter @ConsumerPal.