Sony is confident that the Competition and Markets Authority (CMA) of the UK will seek to block Microsoft’s acquisition of Activision Blizzard.
Sony has published a response upon CMA’s request on how the deal could be bad for competition in the gaming industry.
Sony’s document says that the deal will not only harm competition, but also industry participants, innovation, and consumers. Microsoft also responded to the request and put forth its points.
The Federal Trade Commission (FTA), on the other hand, was “likely” to block the deal from going through, but a new development in the form of a “rift” between the four-member panel may get the acquisition approved.
If the FTC still objects Microsoft’s $69 billion acquisition of Activision Blizzard, the company is ready to fight the United States government agency in court. This is according to a report by Bloomberg, which states that Microsoft would have to take the matter to US court if the FTC does file an antitrust lawsuit.
Microsoft also said that it offered a 10-year contract to Sony to make future Call of Duty games available on the company’s PlayStation consoles. Microsoft president Brad Smith stated in an op-ed in The Wall Street Journal that the company will offer the contract if the deal with Activision Blizzard goes through.
“We’ve offered Sony a 10-year contract to make each new ‘Call of Duty’ release available on PlayStation the same day it comes to Xbox,” Smith wrote. “We’re open to providing the same commitment to other platforms and making it legally enforceable by regulators in the US, UK, and European Union.”
I’m also pleased to confirm that Microsoft has committed to continue to offer Call of Duty on @Steam simultaneously to Xbox after we have closed the merger with Activision Blizzard King. @ATVI_AB @ValveSoftware
— Phil Spencer (@XboxP3) December 7, 2022
Our acquisition will bring Call of Duty to more gamers and more platforms than ever before. That’s good for competition and good for consumers. Thank you @Nintendo. Any day @Sony wants to sit down and talk, we’ll be happy to hammer out a 10-year deal for PlayStation as well. https://t.co/m1IQxdeo6n
— Brad Smith (@BradSmi) December 7, 2022
Let’s take a look at what both the companies have said about the acquisition.
What Sony said about the deal
Microsoft Activision deal poses a threat to the industry
Sony says that Activision’s Call of Duty is “irreplaceable for gaming platforms.” As the deal would put the franchise under Microsoft’s control, it would give the company a big advantage.
Post-Transaction, Microsoft would have the ability and incentive to exclude or restrict rivals, including PlayStation and PlayStation Plus, from having access to Call of Duty.
Sony points out how five studios recently acquired by Microsoft saw a change in their business model. Microsoft even withdrew new titles from these studios from competing platforms. Sony points that CMA has noted that Microsoft has a pattern of doing this with studios, by making their games exclusive to Xbox. “Microsoft would have an “even stronger incentive” to make them exclusive to Xbox and Game Pass post-Transaction,” it said.
The Transaction’s effect in consoles and multi-game subscription services would cause significant harm to consumers, competition, and developers.
Sony says that consumers would be harmed if the deal goes through. PlayStation users wouldn’t be able to play Call of Duty on the console, and would have to buy the Xbox to play the popular game. Microsoft could increase the prices of its games, consoles, and Game Pass with this weaker competition. Sony says this will “reduce innovation and quality.”
Besides that, Sony says this deal would also harm the competition. PlayStation and Xbox invest in innovation and quality improvements due to the number of customers they have. If the number of customers decreases, this means Sony wouldn’t have incentives to invest in improving its products.
Lastly, Sony also adds to this argument that independent developers will also suffer. Indie devs have the option to develop games for PlayStation or the Xbox, and their respective subscription services.
The Transaction would harm nascent competition in cloud gaming.
Since Xbox’s Cloud Gaming is the biggest cloud gaming service in the world, the company can take advantage of this and continue to lead in this category.
What Microsoft said
Microsoft also responded to the request. Some of the company’s responses are:
In addition to being the dominant console provider, Sony is also a powerful game publisher.
Microsoft says Sony is as big as Activision and “double the size of Microsoft’s game publishing business.” It also pointed out that Sony publishes major gaming titles such as God of War, its minority shareholdings in Epic Games and From Software. Microsoft also noted that PlayStation had over 280 exclusive titles on the platform in 2021.
PlayStation has more than double the monthly active users (close to 60 million more) of Xbox.
Microsoft says that if Sony somehow lost all its Call of Duty players, the PlayStation gamerbase would still be larger than Xbox. To fall down to Xbox’s current monthly active users, Sony would have to lose a large number of non-Call of Duty players.
Most gamers on consoles do not play Call of Duty.
Microsoft also stated that a certain number of Xbox gamers did not play Call of Duty for more than an hour in 2021, and a certain percentage of the console’s users did not launch a Call of Duty title at all. The exact numbers are redacted and not publicly available.
Call of Duty gamers are neither ‘special’ nor ‘unique’ in terms of either their spending or user engagement as compared to gamers that favour other popular franchises.
Microsoft says that Call of Duty players are not exactly the biggest money-makers for PlayStation. The company says that in 2022, Call of Duty gamers spent the same time on Xbox as other gamers who played titles such as Fifa, Fortnite, Grand Theft Auto, Minecraft, NBA 2K, and Rocket League.
US FTC was ‘likely’ to block the deal, but a ‘rift’ has emerged within the panel
According to a report by Politico, the United States’ FTC was “likely” to block Microsoft’s acquisition of Activision Blizzard. It was reported that the American agency could file an antitrust lawsuit by next month.
This would have obviously turned out to be a big barrier for the deal to go through successfully. The FTC’s four commissioners involved in the matter had reportedly not voted on filing a lawsuit at the time.
FTC was also stated to be concerned about Microsoft gaining an unfair advantage if the deal went through. Sony had said that if a popular game like Call of Duty is kept away from the PlayStation, it would be a disadvantageous situation for the company.
However, according to The New York Post, the four-member panel is going through a rift, which could mean that the merger could be approved after all.
The FTC panel consists of three Democrats and one Republican. FTC head Lina Khan is against the merger. Christine Wilson, who is the sole Republican, supported the merger; however, an unidentified Democrat amongst Rebecca Slaughter and Alvaro Bedoya has changed their stance and now supports the merger.
This is leading to speculation that Khan could approve the merger, as a 2-2 tie in votes will put her authority into question.
