Microsoft’s massive acquisition of gaming giant Activision Blizzard is looking increasingly uncertain, raising the question: what would be the next step if it fails?
Earlier this year, Microsoft announced plans to acquire Activision Blizzard Inc. for $68.7 billion. The deal is the largest in video game history and the largest the tech giant has attempted to date. It comes against a backdrop of massive economic uncertainty, plagued by inflation and general global political instability.
We live in unusual times. Arguably, regulators have almost fallen asleep at the wheel over the past decade. Tech companies have bought off swathes of their competitors to become totally dominant in their respective spaces. Facebook, now known as Meta, bought out Instagram and WhatsApp, essentially controlling the bulk of western social media. Google has dominated internet search, with the power to sink millions of businesses on a whim every time it “tweaks” its algorithms. Disney, despite its importance in entertainment, bought Marvel, Star Wars, Fox and various other brands with minimal concessions. But maybe recess is over.
The era of consolidation could be coming to an end, with “big tech” coming under the microscope of regulators. On Tuesday, the UK’s Competition and Markets Authority (CMA) blocked Meta from acquiring GIF platform Giphy, despite previously buying a string of booming social media platforms. Goldman Sachs also helped a client offload a mountain of Activision Blizzard stock, sending a pretty clear signal that there’s a lot of doubt.
Whatever the reason, it’s looking increasingly likely that Xbox’s big Activision Blizzard deal is in jeopardy. This begs the question: what would Microsoft’s next move be if the deal fell through?
Could the Activision Xbox deal really fail?
It looks like there’s a real possibility Microsoft’s big Activision Blizzard deal won’t materialize. It comes amid increased pressure from Britain’s CMA and general skepticism that tech giants like Microsoft will do the right thing with their acquisitions.
The UK regulator released a somewhat laughable document outlining its position this month, essentially echoing Sony’s talking points while disparaging Microsoft’s. It’s a confusing, one-sided view of the whole affair, where the AMC selectively ignores certain realities throughout its decision. CMA says Microsoft had ‘displayed a model’ of creating exclusive content from studios it acquired for Xbox (shock, horror) – while blatantly omitting cross-platform titles like Minecraft Dungeons and Minecraft Legends, alongside existing service games like Fallout 76 and The Elder Scrolls Online. The CMA’s quest for straws to grab led them to Project Midnight from one of our own interim reports – it’s a game that doesn’t even officially exist.
The CMA also failed to acknowledge that some of Bethesda’s Microsoft content still exists on Sony’s subscription services today, while claiming that Microsoft would use Call of Duty to “harm” Sony’s position – curiously omitting that Sony is the market leader and will remain so post-acquisition.
The document confirms Microsoft’s claim that Nintendo is successful without Call of Duty by claiming that Nintendo is not even in competition with Xbox and PlayStation. Nintendo isn’t meant to be a competitor in the space due to its “family” orientation, ignoring the fact that the Nintendo Switch has mountains of violent games and some literally forbidden on Xbox to be too ecchi (don’t look for this word at work).
Why am I going after the CMA? Primarily to illustrate the establishment’s continued and ongoing ignorance of all things tech and, moreover, all things gaming. The first phase of the CMA review seems to revolve around mining hot takes on Twitter rather than actual market data. At least theoretically, the second phase should lead to a closer look at how the deal might impact the UK market.
If something sabotages the case, it will most likely be a combination of incompetence and projection. After letting the tech body go wild with acquisitions for decades, regulators could re-examine their aim in a world where Meta has destroyed Instagram and eroded privacy protections on WhatsApp, while Google has become the global arbiter of what you can see on the internet.
Microsoft called AMC’s opposition “misplaced” and frankly, there’s no better word to describe it. Unlike search engines and social media, the gaming industry is dynamic and competitive, with plenty of room for small newcomers to disrupt the industry. The same cannot be said for various other emerging internet industry regulators who have failed to do so, you knowregulate – but I digress.
There’s no guarantee the deal will fail, of course. Microsoft could make concessions, like a firm contractual commitment to keep Call of Duty on PlayStation in perpetuity, for example. But assuming the deal doesn’t go through for some reason, what would Xbox’s next move be?
If that fails, what could Microsoft do next?
The phrase “be careful what you wish for” comes to mind with regard to this whole situation, because I think PlayStation’s intervention with regulators effectively gave Microsoft a mandate to take the gloves off and return to the aggressive days of the Xbox 360 era.
For years, Microsoft behaved like a company that wanted to coexist with PlayStation for the good of the industry as a whole. Microsoft continues to support Minecraft, Fallout 76, The Elder Scrolls Online, and other pre-acquisition games. During this time, Sony gained a reputation for making exclusive bits of games like Destiny and Call of Duty at the expense of Xbox and PC gamers. This has extended to entire franchises like Final Fantasy with vague periods of exclusivity that confuse Xbox customers.
I don’t blame Sony for doing this – it’s all business in the end. I speak here analytically. The only horse I personally have in this race, as a fan, is Blizzard, which I want to free from its CEO, Bobby Kotick. Kotick, who remains at the helm of the company, is said to have overseen a “frat boy” culture and was aware of the sexual harassment allegations that led to an ongoing lawsuit in California courts.
I also hope to see dormant Activision Blizzard franchises, like Starcraft or Guitar Hero, revive, as Microsoft CEO Phil Spencer has hinted. Today’s Activision Blizzard is a trend-seeking scammer that leaves mountains of beloved IPs dead because it only brings in millions instead of billions.
It’s the regulatory irony here, really. Gamers, regardless of platform, would benefit from this deal, with more games on more platforms. Arguably Activision Blizzard’s staff would also benefit, given that Microsoft has reported a fairly relaxed attitude towards unionization. But for some reason, regulators seem determined to preserve the status quo specifically for Sony PlayStation.
However, Sony may end up regretting getting involved. In a world where Microsoft has sat down and been told by regulators that Sony’s way of doing business is the right way, Sony could unwittingly slip into a position where it loses the content bidding wars on the left. , right and center.
Microsoft could very easily agree to this Call of Duty marketing deal from Sony. The Xbox platform holder could dump a pile of cash on Square Enix for exclusive Final Fantasy games. It could offer millions of dollars to create franchises like Monster Hunter, Grand Theft Auto, Persona and who knows what else, timed Xbox exclusives. He could take over Tencent’s strategy, taking strategic and influential positions in companies through stock purchases at the expense of PlayStation.
After all, the company will have $70 billion to play with. Plus, in this inflationary economic climate, sitting on that money is a big no-no. Without the gloves, Microsoft could completely change tack, and regulators will have essentially given them the mandate to do so.
Failed deal could end up being worse for PlayStation and consumers in general
Microsoft could quite easily create a climate in which PlayStation gamers find themselves deprived of more games than they would have been had Microsoft simply been allowed to complete its acquisition – and there wouldn’t be much that regulators could do to intervene here because it would just be trade deals. between two free societies.
I previously wrote that Sony knows that Microsoft will not remove Call of Duty from PlayStation. Minecraft exists as a great example, pulling in a ton of money by staying on PlayStation, and besides, it’s not the bad guy. Microsoft was hammered by the media for striking a timed exclusivity deal on 2015’s Rise of the Tomb Raider a few years ago, and it hasn’t revisited that approach since. However, this whole ordeal might leave him with little choice if he wants to stay competitive.
The message that regulators might end up sending here is “do business like Sony.” While telling Activision employees, “no, you don’t deserve better.” He also tells fans of Activision’s back catalog to embrace the endless cycle of Call of Duty, Call of Duty, Call of Duty, so the money keeps coming. This suggests little hope for the return of Starcraft, Guitar Hero, Prototype, or other classic franchises.
Perhaps most egregious of all, the CMA seems intent on preventing consumers from getting a better deal with Xbox Game Pass – despite the fact that it’s the body’s sole reason for existing. According to the CMA, PC and Xbox players should pay $70 for Call of Duty instead of $10. And why? Quite simply because the market leader has withdrawn from the competition. This amounts to dereliction of duty at best, but it seems to be the norm whenever a government agency takes even the most vague interest in the video game industry.
But hey, if that’s what the regulators want, Microsoft could play its game. If Microsoft is forced to compete on Sony’s terms, this could be a world Sony might regret being in.
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