Microsoft Has Officially Acquired Activision Blizzard

[Moonface]

Official Industry Opinions About the Activision Blizzard Acquisition
Sony, Ubisoft, Warner Bros., Bandai Namco, Apple, Riot, Google, Amazon and more have given their official opinions on Microsoft's planned acquisition of Activision Blizzard.

These statements come from a translation of official documents of the review process by regulators in Brazil, one of the almost 20 regulators (including Japan, UK, Australia, New Zealand, China, and South Korea) who have to approve the deal for it to go through, along with the FTC and European Commission. These official documents are available because the Brazilian government is very open about the Public Administration, and you can see them for yourself here, although they are not in English.

The following questions were presented to all of the questioned parties:

The Questions

• Does your company agree that physical distribution and digital distribution of games should be treated as separate markets? Or would physical and digital distribution compete with each other in the same market?
  
  
• Should the digital video game distribution market be segmented by hardware/platform type (PC, consoles and mobile devices) or could it be considered as a single market without segmentation?
  
  
• If you consider that the game distribution market should be segmented into more restricted markets, or that it should encompass a broader set of products or services, etc.), present an alternative definition and justify your answer.
  
  
• In your company's view, subscription game services (such as Xbox Game Pass) should only be understood as part of a broader market for digital game distribution, or they could constitute a more restricted/specific market from a competitive perspective?
  
  
• From the consumer's perspective, are subscription services perceived as direct competitors of individually purchased games, in the "buy-to-play" model?
  
  
• There are relevant barriers to the entry of a company in the electronic game distribution market? For the console, PC and mobile markets.
  
  
• In the last 5 (five) years, there has been any relevant entry into the distribution market of digital gaming?
  
  
• Provide an estimate of the time required to complete a full entry (from the planning phase to the start of the entrant's activities), so that an entrant can be considered an effective rival in the digital game distribution market. For PC, console and mobile.
  
  
• An isolated entry into the game distribution market can be considered commercially viable? Or an effective entry into the segment would depend on the concurrent entry or presence in other market(s), such as gaming hardware or the development and publishing of games? For PC, console and mobile.
  
  
• The market for physical distribution of games for consoles exerts some competitive pressure on the console game digital distribution market, considering the global and national scenarios?
  
  
• Contracts entered into with digital stores usually contain exclusivity clauses, that are limited to a certain period?
  
  
• In your experience, the terms of agreements entered into with Microsoft digital stores differ significantly from those practiced by other players in the digital distribution market?
  
  
• Does Activision Blizzard publish any title(s) which, due to its characteristics or specificities, does not have close competitors published by other companies in the games?
  
  
• In the event that, in the future, Activision titles Blizzard are no longer available to competing Microsoft/Xbox ecosystems, to what extent would competition in the digital game distribution market be affected?
  
  
• Your company thinks it is likely that Microsoft will leave to offer Activision Blizzard games on competing digital stores, even though this practice could result in the loss of revenue from sales of these titles in other channels?
  
  
• In your company's view, does Activision Blizzard publish any game that can be considered essential for a gaming hardware vendor to work?
  
  
• What is the relevance of the existence of exclusive titles in the competitive dynamics of the gaming hardware (console) market?
  
  
• It would be possible to expect a significant reduction in the number of sales of rival Xbox consoles in the event of non-availability of Xbox titles from Activision Blizzard for these platforms?
  
  
• What is the position of your company regarding to positive/negative aspects of this Merger in relation to the online advertising market in Brazil?
  

Here are the responses from each of the questioned companies, courtesy of a translation effort by a user on ResetEra:

Sony

They say that from a development/publication perspective, game development typically involves an early stage that is neutral in relation to the platform, before the game is adapted for one or more specific platforms.

They believe that all games compete for engagement of the player. Players choose their gaming platform based on pricing, technical features, and available game types. The available content is the main factor for the player to choose a platform.

They say that there are few barriers to entry in game development and publishing for PC. That only one developer can create an "indie" game and distribute it online, but creating a high-end AAA game (like Activision's Call of Duty) requires a budget of hundreds of millions of dollars and thousands of employees.

They say that apart from Activision there are few developers/publishers capable of producing AAA games, such as EA (FIFA), Take-Two/Rockstar (Grand Theft Auto) and Epic Games (Fortnite). These games tend to be long-running franchises with big budgets, multi-year development cycles and very supportive followers.

Despite all of that, Sony believes that none of these developers could create a franchise to rival Activision's Call of Duty, which stands out as a gaming category on its own. That's why they believe that Call of Duty is so popular that it influences users' choice of console. In fact, their network of loyal users is so ingrained that even if a competitor had the budget to develop a similar product, it would not be able to create a rival.

They talk about the time, money, number of employees, millions of followers, sales and other data points related to Call of Duty to show how it's a very unique franchise that cannot be replaced.

They agree that subscription services compete with games purchased for a one-time fee. But they think that the lowest upfront costs of subscription services could be anti competitive in relation to publishers who recoup the significant investments in games by selling them for an upfront fee. They also think that this could harm consumers by reducing the quality of the games.

They say that over the past five years, Game Pass has grown to capture approximately 60-70% of the global subscription services market (that marketshare is even greater in Brazil, where Game Pass represents approximately 70-80% of the PC subscription services market).

They believe that it would take several years for a competitor – even with substantial investments – to create a rival effective for Game Pass.

Call of Duty represents an important revenue stream for the PlayStation (they provided data but it's redacted), and it is one of SIE's biggest sources of revenue from third parties

Warner Bros

Developing and publishing PC and console games may require investment in terms of value, time and resources. However, the existence of several companies that develop and publish games for PCs and consoles demonstrates that such barriers are not high enough to prevent entry – especially by companies that operate in somehow related sectors, such as electronics or software – and/or robust competition. Entering the mobile market has even lower barriers.

They don't have specific comments or concerns at this time regarding the transaction.

Ubisoft

For them the PC and Console markets are the same, but mobile is totally different.

There is no justification for a market distinction based on their genres and types. Many games cross genres, and players typically are not limited to a single game genre.

They don't think that ABK has unique games because there is no such a video game title that doesn't have close competition. All publishers and games compete for available playtime, and none title stands alone in its own genre.

Battlefield, PUBG, Apex or Rainbow Six are competitors for COD. Candy Crush has multiple similar games and ESO Online or Blade & Soul are alternatives to WoW.

They talk about Ubisoft+ Classics for PS Plus or how they are also releasing their games on Gamepass, beyond Ubisoft+.

They think that subscription services are a constant trend in the sector and its importance it's growing up. However, at least for the time being, it should not be considered a different market as it is just a different way of accessing the content, which remains available through other channels (eg "buy-to-play").

Nuuvem

They are a digital games store for PC, Mac and Linux from LATAM.

They say that there is an obvious difference between physical distribution and digital. it is increasingly common to have independent games that are only distributed digitally.

Yes, subscription gaming services compete directly with individual sale of games, even though they may not be perceived as a complete replacement. Players who subscribe to these services tend to avoid purchasing games available or that could come to these services (even though lots of games are only available for 1 year).

In Brazil it's easier to enter the PC and mobile markets for someone new, specially in comparison to the console market.

All the games from ABK have close competitors in their categories, like Battlefield, Free Fire, Final Fantasy XIV or Bejeweled.

The ABK games we already removed from their platform 1 year ago.

They understand Gamepass as something positive for consumers right now but that in the future it could generate a lot of concentration and exclusive content not being available on other platforms.

Bandai Namco

PC and Console markets are very similar, but the PC market is almost fully digital, so the separation makes sense. Mobile is very different. They don't think the 3 markets should be grouped.

Every game is unique. The are concurrent competitors to Call of Duty, such as Battlefield, Valorant or Destiny. The same in relation to World of Warcraft.

Apple

They don't answer almost any question, the ones that have an answer are redacted but they say that they are aware of public statements made by Microsoft and Activision regarding its post-operation plans (keeping some games multiplatform).

They also consider Apple Arcade as a relevant entry into the digital distribution market in the last 5 years.

Riot Games

PC, console and mobile have to be considered different platforms.

They consider Naughty Dog as a potential competitor to ABK - Microsoft for the creation of AAA games. The thing is that they also mention Sony as an option. :p xD

Call of Duty, WoW and Candy Crush have real competitors, according to them. Battlefield, Apex, Counter Strike, Valorant or Rainbow Six for COD; Cookie Jam or Bejeweled in relation to Candy Crush and Rift, Runescape, FF XIV or TERA in relation to WoW.

They also talk about the collaboration with MS.

In Riot Games' view, subscription game services are part of a market for broader distribution of digital games and consumers are unlikely to perceive them as competitors of games bought individually, but as alternatives that can fit better in the preferences of players who don't mind keeping a digital copy of the game and who are happy with the subscription service game library offers.

They also think that MS will honor the public statements made about keeping multiplatform some franchises.

They don't expect any anticompetitive effect on the market post acquisition.

Amazon

They say that they don’t have enough information to assess the importance of Microsoft and Activision-Blizzard on game publishing. The majority of their answers were also redacted.

Google

They highlight all their different initiatives (mini games, VR, Play Pass, developing exclusive games for Stadia until 2021, etc).

Alternatives to COD could be Battlefield, Counterstrike or Rainbow Six. Alternatives to WoW would be Lost Ark, ESO Online or Guild Wars 2. And alternatives to Candy Crush would be Puzzle Quest or Bejeweled.

They also highlight other important franchises from ABK such as Overwatch, Diablo or Hearthstone, including possible alternatives (according to Google, Fallout is an alternative to Diablo).

They understand that there will be a significant number of game developers/publishers on the market after the acquisition of Activision Blizzard by Microsoft.

Meta

Every single thing from Meta has been redacted except for a single response, where they say that they only offer games through Quest (VR) and Facebook Gaming.

---

The general summary seems to be Sony has a negative view on the matter, and consider Gamepass potentially harmful to consumers and traditional publishers; however, they praise Call of Duty as almost irreplaceable and powerful enough to be its own game category. The BigTech companies are rather uncaring about it, and the rest of the gaming companies aren't really against the acquisition or feel threatened by it.

Not surprised that Sony is against it, since Microsoft is their direct competitor and they may lose access to Activision Blizzard titles if this goes through like is already happening with the Bethesda acquisition. The other companies probably don't care because any Activision games that become exclusive to Xbox just means less competition on the other platforms.

I didn't know the regulation process for this was so widespread to include almost 20 different countries though; I thought it was just down to the big governing bodies like FTC and the EC.

[Moonface]

Microsoft Shares Proposed Benefits of Activation-Blizzard Acquisition
Microsoft has added a new page to their website showing the benefits they believe will come of Xbox's acquisition of Activision-Blizzard: https://news.microsoft.com/activision-bl...quisition/

Here is a rundown of the proposed benefits:

Benefits for players

• More games on more devices including Xbox, PlayStation, phones and online
  
  
• Choice in how and where people buy games with subscription and one-off purchase options
  
  
• For the 95% of gamers who play on phones, alternatives to gaming offerings from the dominant mobile platforms
  

Benefits for game creators

• More ways to get games in front of more players through support, investment and better access to gamers
  
  
• Better revenue and fair marketplace rules through our app store principles
  
  
• Greater flexibility in payment systems and the experience they provide their fans
  

Benefits for the gaming industry

• More competition in mobile, where a couple of big players dominate
  
  
• Greater competition in traditional gaming, where Sony and Nintendo will remain the biggest
  
  
• Emphasis on positive workplace culture and increased local investment from Microsoft in studios and creative ecosystems around the world
  

[Maniakkid25]

Necroing this thread because there's been a major development. The acquisition is now being halted by UK regulators as of yesterday, and absolutely tanked Activision's share price by 11 percent today. So, this might be the actual nail in the coffin for the deal.

[Dragon Lord]

As the youngsters now days would say: Based UK.

[Moonface]

The UK tends to be very stern on matters involving "fair competition" in any instances I know of. Two of the large supermarket chains wanted to merge and it got shot down because the CMA said it would have too much power over the market, so seeing them shoot this down doesn't surprise me. I didn't really get what their issue was specifically but I came across this tweet thread just now that better details things: https://twitter.com/ethangach/status/165...1311565825

The short and narrow of that thread is as follows:

• Mark Cerny told the CMA that Sony has found a way to stream games with less latency than playing them on a PS5.
  
• Another competitor told the CMA that Google Stadia failed because of a lack of Call of Duty on the platform, despite its reasonable catalogue of other titles. Basically they told the CMA that Activision games are big enough powerhouses to actually hurt competitors if they are absent from competing platforms.
  
• Microsoft tried using IGN and PC Gamer lists of their top PC games as a way to demonstrate that Call of Duty is not as powerful as claimed in the above point; however, the CMA determined this was not an accurate representation of the popularity of the franchise given that reviews do not translate to sales and public opinion.
  
• Microsoft's Cloud Remedy entitled Microsoft to all money from in-game purchases regardless of platform, which the CMA took issue with (among other things in this document). Microsoft pitched an amended version of their Microsoft Cloud Remedy but did not change this requirement for in-game purchases, which caused the CMA to reject the proposal again, citing that it would mean any cloud platform that features Activision titles would not be a rival to Game Pass Ultimate but a customer to Microsoft. Platforms currently keep 30% of a purchase for things such as battle passes, but the Microsoft Cloud Remedy would change that to 0%, thus giving Microsoft 100% of revenue streams from any competing platform on the market that features their titles.
  
• There seems to have been some poor communication at play too. The CMA is of the belief that players need to purchase Call of Duty to stream it on PS Plus, due to statement by Microsoft that players can stream Call of Duty on PS Plus that didn't seem to specify that streaming the game does not require a purchase of the game as well.
  
• Sony believes that Microsoft offering titles like Call of Duty on Game Pass on the release day of a new entry in that franchise would force them to put their own first-party titles onto their own subscription platform on release day too in order to compete, which would diminish the strength of PlayStation Studio's titles as well as the revenue generated from them.
  

So there seems to be a few things in there that Microsoft could try to make a review case about, but I don't think the fifth point will matter when the CMA understands it better so long as the Microsoft Cloud Remedy doesn't change to stop 100% of revenue going to Microsoft. Even with cloud gaming not involved, I could see that point alone being enough to turn the CMA off the idea of allowing Microsoft and Activision to merge.

I'll be surprised if Microsoft manage to change the CMA's ruling honestly because it seems they've already tried amending things to no avail. The CMA are some stern bastards to get through because they really dislike anything that gives a corporation too much power over the market. I'm pretty sure they're the ones who keep the large grocery chains in line when it comes to not flooding an area with their stores to ensure that other chains have a space in the area as well as preventing too many large chains coming into an area and killing all the smaller chains that already exist there.

[Moonface]

EU Approves Microsoft’s Acquisition of Activision Blizzard
European Union regulators have approved the $69 billion acquisition of Activision Blizzard by Microsoft, subject to remedies offered by Microsoft in areas related to cloud gaming. These remedies are centered on allowing users to stream Activision games they purchase on any cloud streaming platform.

This approval comes in stark contrast to the ruling made by regulators in the UK last month who blocked the acquisition over concerns of the effects to cloud gaming.

Source: https://www.cnbc.com/2023/05/15/microsof...maker.html

[Moonface]

FTC Seeks to Block Microsoft's Acquisition of Activision Blizzard
The Federal Trade Commission is set to file for an injunction Monday seeking to block Microsoft’s proposed acquisition of Activision Blizzard, according to sources at CNBC: https://www.cnbc.com/2023/06/12/ftc-to-f...zzard.html

---

I thought the deal had only been blocked by the UK so far but this article gives me the impression the US hadn't approved of it yet either, but for some reason I thought they did.

[ShiraNoMai]

There's a lot of redtape in the US so it took til now to finally actually get them to even put word on it. We just assumed US would be OK with it considering: every other monopoly in this country.

[Moonface]

With the things I've been hearing from that FTC hearing I honestly hope Microsoft get entirely blocked from this deal and it doesn't happen. Making a claim of "We have to buy this company because we're losing the console war" just sounds to me like "We can't sell a console as good as our competitor so take pity on us". Don't go buying huge publishers and potentially making most if not all of their stuff exclusive to your platform just to drive up sales of your product by forcing people to it if they want those games because the stuff you do yourselves isn't enough to beat the competition. That's just a shit practice.

[Moonface]

Microsoft wins FTC fight to purchase Activision Blizzard
A California judge has decided to deny the FTC's preliminary injunction request and allow Microsoft to close its acquisition of Activision Blizzard following five days of testimonies: https://www.theverge.com/2023/7/11/23779...-trial-win

Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services. This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.

As stated by the article, this ruling comes a week before the official July 18 deadline to close the acquisition; however, doing so would require a change in ruling by the UK's Competition and Markets Authority or for Microsoft to close without involving the UK. The two companies could opt to temporarily extend their merger agreement to give themselves more time to deal with that matter, which might happen since the appeal against the CMA's decision isn't set to happen until July 28, ten days after the current acquisition deadline.

[Dragon Lord]

It made an agreement with Nintendo to bring Call of Duty to Switch

This is the biggest travesty of the merger deal. What did Nintendo fans do to deserve to have this trash put on their system? They may be Nintendo fans, but not even they deserve such a cruel and unusual punishment.

[Moonface]

Call of Duty on Switch is an odd agreement only because Nintendo hasn't had one of those games since Ghosts for the Wii U, which was 2013. I feel like if the series was going to sell well on Switch that Activision would have already done it, and they either haven't because they don't expect it to sell well, the games aren't going to run well on it, or it'll take too much effort to port them over effectively for the amount of return they'd potentially see. I can see Nintendo not caring to turn that proposal down since it doesn't cost them anything and if it goes poorly it only affects Activision (well, Microsoft actually in this scenario) but I doubt that particular thing had any decent weight on Nintendo's opinion about this merger overall.

[Dragon Lord]

I can't see current CoD games running well on the Switch at all. Add in how terrible the Switch's online is, you're going to be stuck with a very bad looking game with horribly laggy online.

Then add in how terrible the experience is going to be if there's cross-play and you have Switch players with PC players... huge yikes. Even Switch players with PlayStation players would be a pretty awful experience for both players. They'll have to make the Switch ports not have cross-play, though I wonder how much that would turn people off of getting these games on the Switch.

But as you said, it doesn't cost Nintendo anything. I just think it's funny to promise something that won't do well on Switch like CoD, instead of promising something that could do well, such as The Elder Scrolls VI (then again, plenty of time for MS to decide they want to share this with Nintendo as well).

[Moonface]

I can't see current CoD games running well on the Switch at all. Add in how terrible the Switch's online is, you're going to be stuck with a very bad looking game with horribly laggy online.

Very likely, going by the tests on the most recent CoD game by Digital Foundry:

• PS5/XSX/PC all run the game at 60fps or higher without issues
  
• PS4 can hit 60fps but can dip into the 50's
  
• PS4 Pro hits 60fps almost all the time
  
• XBO X seems to be all over the place, ranging from 40-60fps depending on the game mode and screen detail
  
• XBO S is 40-50fps but can go down to 30fps
  

At best the Switch hits what XBO S does, but I would be curious to know how badly that disadvantages players on XBO S when playing against anyone on a better performing system and how many people even touch the multiplayer a lot on XBO S to begin with because of that performance difference. However, this is just for the regular multiplayer. There's also Warzone that comes bundled with all the most recent CoD games, and that apparently really doesn't do well on the last gen consoles at all across all of them. Switch is either going to do it worse than that, or the mode just isn't even brought over to Switch at all and so any Switch players don't even get the choice to play that, and given how so many third party games on the Wii U were ignored because of stripping features due to hardware limitations I can't see many people grabbing a Switch version if it turns out to be the worst version of the game overall. Especially when I expect most people who would get CoD already have a platform to do it on and wouldn't buy the Switch version anyway, since even the portable aspect of it probably falls flat once performance issues come into play as well as the resolution likely being lower and making it hard to pick out opponents on fields.

TES6 wouldn't come into play for a pitch from Microsoft over this deal for Nintendo since they already own Bethesda. Given that a lot of Bethesda games got ported very well over to Switch I wouldn't be surprised to see future Bethesda games come to a future Nintendo console, but anything that was ported is stuff that came out before Microsoft bought Bethesda, so all future stuff might just remain exclusive to them.

As for making deals with Nintendo over Activision games, CoD was really the only extra thing Microsoft could offer besides just having everything else generally continue to come to Nintendo platforms. For any Activision game produced in the 2020's, only two (Crash Bandicoot 4: It's About Time and Tony Hawk's Pro Skater 1 + 2) have come to Switch. The rest have not, although it's worth noting that besides Crash Team Rumble every other game is a CoD game. Seems to be the same case for any games released by Activision after the Switch was released; if it wasn't CoD, they got a port. So I guess Microsoft just pitched CoD as something extra to give Nintendo alongside just continuing to have everything else Activision does ported to Switch like has already been happening.

[Dragon Lord]

The thing with TESVI is that one of the main issues in the lawsuit was Microsoft making all Actiblizz games exclusives like they did with Bethesda games so far, but they could have come out and been like, "Hey, we're going to put TESVI on Switch, so..." since Microsoft wants to implant the garbage known as Xbox Games Pass on the Switch so they can leech off of its success anyways.

Though that reminds me, in addition to how poorly the games would run on Switch, you also have to consider that the CoD ports are likely going to be Cloud versions of the games, which means even worse performance and online functionality on the Switch than normal. Man, that is going to be rough for anyone crazy enough to play those games on that platform.

I think one other game they could bring to the Switch would be Diablo IV. I'm kind of surprised that Blizzard didn't release the game on Switch to begin with, since Diablo III was released there. Though I guess it might have something to do with their wonderful decision to make Diablo IV an "always online" game, completely destroying any hopes of being able to play it on the go on a Switch.

It'll be interesting to see if Sony responds to this deal apparently now going through. I wouldn't mind seeing them going out and scooping up Square Enix. Maybe Sony would be able to knock the stupid idea of NFTs out of their presidents head, and we could finally get Octopath 1 and Triangle Strategy on PS4/PS5.