[Rant] CMA vs Microsoft / Blizzard merger is nonsense

General Discussion
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So I’ve been meaning to piece together this argument for a while now. But I figure if I post it here, then I will get around to doing that. Want to have this ready to go before South Korea approves, which will probably be sometime this week or next week.

Please let me know if any of this isn’t clear enough, doesn’t make sense, or I’m wrong.

UK CMA = United Kingdom Competition & Markets Authority, headed by Sarah Cardell.
US FTC = United States Federal Trade Commission, headed by Lina Khan.

Summary:

37 countries have approved the Microsoft/Blizzard merger with 8 more expected in the upcoming 8 weeks or sooner. That said:

  • The UK’s CMA is the current hurdle to get past for approving the Microsoft/Blizzard merger.
  • The FTC is also a hurdle, but if they can’t get a legal blockage called a “Preliminary Injunction”, then they are effectively toothless. I don’t think they will get that based off of how weak their argument is.

In general, this overall remaining argument from the CMA comes down to:

  • “How much of a current size of the Cloud Gaming (aka Game Stream) marketshare does Microsoft currently have.”

And they are focusing on global figures, not UK figures. Which I’m sure you can tell why:

  • But they learned from their mistake, and that’s why They Don’t Show People Their Math Anymore.

But let’s try to look at the math ourselves.

None of that makes any sense with just a basic sanity check on the math. It’s ridiculous.

The CMA is freaking out over 0.007% of the global videogames market… And that’s probably realistically closer to 0.00007%

  • “No. It’s it’s own nascent baby market. Gotta protect the baby right? What monster wouldn’t want to protect the baby?”
    • Which realistically is just dishonest cherry picking, paired with dishonest counting methods.

None of this makes any sense. I’d argue that’s on-purpose. Because it’s a lie. It’s a really big lie. I’d argue it meets the standards of “fraud”.

It’s the regulator equivalent of Sony’s CEO saying: “I don’t want a Call of Duty deal, I want to block your merger”. Where they already have their answer, and no amount of solutions will change their mind. It’s “bad faith”.

As far as I can tell, you got two very self-righteous regulators that believe that lying is okay, if it’s for a good cause.

  • And you know what’s the weirdest part about all of this?

So what the heck even is their argument anymore? It doesn’t make any sense.

Just the deeper you go on this, it just gets so deranged and weird.

This is the type of crap I’ve been looking at for weeks. And it’s maddening to think how few gamers/journalists actually know what’s been going on.

Meanwhile,

you got Sony saying “The (sales) pipeline made by the games that we’ve acquired so aggressively over the past couple of years…we feel very bullish about the profit structure in 2-3 years.”. With Sony raising even more cash for Mergers/Acquisitions.

And they are also slashing access to games on their game subscription service.

It should be noted that Sony has almost 5x as many exclusives as Xbox.
Sony has 286 exclusive games compared to only 59 on Xbox. On top of paid exclusivity deals with companies like SquareEnix, Naughty Dog, and Konami.

With them planning an “aggressive push into Cloud Gaming”.

Looking forward, 37 countries have approved. South Korea will probably be next.

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I’ve been meaning to do a formal write-up about the CMA’s decision so this will be my first draft.

There are good arguments on both sides of the debate.

Primarily I believe that it’s important for us to have all of the facts that surround the topic as a baseline point of reference.

In order to understand why the CMA blocked this deal we need to first look at what they’ve told us.

On April 26th they published this on the official government website:

https://www.gov.uk/government/news/microsoft-activision-deal-prevented-to-protect-innovation-and-choice-in-cloud-gaming

The UK cloud gaming market is growing fast. Monthly active users in the UK more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to £11 billion globally and £1 billion in the UK by 2026. By way of comparison, sales of recorded music in the UK in 2021 amounted to £1.1billion.

Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.

Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).

The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.

How did Microsoft try to address this?

Microsoft submitted a proposal to address some of these concerns which the CMA examined in considerable depth. The proposed remedy set out requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.

What was wrong with their solution?

Microsoft’s proposal contained a number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services:

  • It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
  • It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
  • It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market.

That’s a quick summary of why they blocked the deal.

Where can we see the full report?

https://assets.publishing.service.gov.uk/media/644939aa529eda000c3b0525/Microsoft_Activision_Final_Report_.pdf
https://assets.publishing.service.gov.uk/media/64493994814c66000c8d0739/Appendices_checked.pdf
https://assets.publishing.service.gov.uk/media/6448f0da814c6600128d067c/Microsoft-Activision_Overview_document.pdf
https://assets.publishing.service.gov.uk/media/6448f377814c66000c8d067f/Microsoft-Activision_FR_Summary.pdf
https://www.gov.uk/cma-cases/microsoft-slash-activision-blizzard-merger-inquiry

It’s important for us as readers and consumers to have these documents as a point of reference to refer to when needed. I would suggest their inclusion in your post.

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That argument about a lack of broad access to those 10 year deals, is kinda irrelevant if they were now offering 10 year deals for the entire Xbox library to any Cloud Gaming company that wants it.

And that 60-70% global cloud gaming marketshare figure doesn’t make any sense based on public filings data. (And math supporting that figure is redacted out of the report)

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uh… I’m really tired but i’ll give this a shot.
I don’t know if you’re looking at this from a court perspective or an approval one.
I think in this situation the public statements and reports probably mean nothing after they’re made public. The internet is fast but it isn’t omnipresent.
Although I’m sure there are certain “things” that regulate what can and can’t be approved.
There’s probably more politics and corporate interests than sense involved than I personally care for. (Including corporate interests involved with the commissions side).

I don’t think I’d call it a nonissue though since I don’t think there was a consensus on the ramifications of the merger. Which might be the entire reason why you can’t see a clear argument. The merger itself is really difficult to quantify the results of which could either spell disaster or absolutely nothing. The nature of the approval is to prevent any future monopolization from my understanding.

Edit: I forgot to mention how the deal seeps into other economies that have their own priorities.

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Microsoft had not yet issued this revised remedy at the time of the CMA’s decision to block the deal.

Furthermore the details of this revised remedy are yet to be seen.

This was what the CMA CEO Sarah Cardell said in a recent parliament meeting:

"As you may be familiar, our merger control decisions are taken by our independent panel groups, and the group reached the decision back at the end of April to prohibit the transaction. The reason for that was that they identified a problem in the cloud gaming market. This is a rapidly emerging part of the market, and it’s a market where Microsoft has a leading position, as things stand, across its position in relation to the cloud infrastructure more broadly, as well as Xbox and Windows.

"So we were concerned about the ability of Microsoft to take that position and combine it with a very strong position that Activision has in terms of its very significant portfolio of games. The group considered the deal very, very carefully and they concluded this would lead to a lessening of competition, effectively because it would prevent other cloud gaming providers to be able to compete as that market goes forward.

"The group very carefully considered a proposed remedy that was tabled by Microsoft. The group went through several iterations of that, and ultimately concluded that it would not be effective to resolve the competition concerns.

"Now a reminder of the UK position is that when we identify a merger will result in a substantial lessening of competition, the legislation requires us to consider whether any proposed remedy will be comprehensive and effective in resolving those concerns.

"The group considered this very carefully, and concluded that the proposed remedy would not.

"Essentially the reason for that is the remedy would have involved Microsoft offering a licensing deal that would effectively set the terms of trade for the market for the next 10 years. It would have set the terms in which other cloud gaming providers would be able to get access to those games.

"The group considered that was not an effective remedy, and remembering that this is a really important evolving market in which we want to keep open to free competition. We want to make sure that competition is able to evolve in that market unencumbered by regulatory constraints.

“That was the essence for the reason to reject the remedy.”

https://parliamentlive.tv/event/index/625b836d-971f-47ee-b4b5-e537eca5d70f?utm_source=substack&utm_medium=email
https://www.tweaktown.com/news/91532/microsoft-offered-several-iterations-of-its-cloud-remedy-to-the-cma/index.html

If the figure was grossly overstated or overestimated then presumably that will come out in the court hearings.

For the sake of argument let’s assume it was.

How does it bear on the rest of what they said?

“Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).”

https://www.gov.uk/government/news/microsoft-activision-deal-prevented-to-protect-innovation-and-choice-in-cloud-gaming

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Incidentally

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Because Luna is gigantic, and Playstation Plus really isn’t that much smaller than Game Pass. And they said they want to aggressively grow PSPLUS.

And assuming it’s lucrative, Google can jump right back in whenever they want to.

Much less Nvidia and Netflix.

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@AmazonLuna 3.36K subscribers 178 videos

3.36K subscribers

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200 Million people have Amazon Prime accounts, all of those are eligible for Luna

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Meanwhile anyone with an internet connection can partially access xCloud through a web browser.

There are an estimated 5.18 billion internet users in the world today.

By extension 5 billion people are eligible to play Fortnite on Xbox Cloud Gaming.

https://datareportal.com/global-digital-overview#:~:text=There%20are%205.18%20billion%20internet,during%20the%20past%2012%20months.

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Isn’t that kind of the issue though.
Not all users are equal.

Giving a service away for free isn’t nearly as lucrative as a paid subscription.

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Of course that depends on how it’s monetized.

A free service can be very lucrative when it includes or promotes access to more things as part of that service.

It’s why Overwatch moved to free-to-play.

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Overwatch moved to Free to Play because of Microtransactions.

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Fortnite gets a ton of revenue from microtransactions.

Maybe Xbox gets a cut of the slice?

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It’s possible. But it’s not like Fortnite needs Windows to run.

Any company could run Fortnite game streaming if that’s really profitable.

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What else are you going to run it on other than Xbox and PlayStation?

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On AWS/GCP servers in linux virtual machines.

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Wine, Proton, and Lutris have done a lot to expand the possibilities of Linux gaming but native support is always going to be better and there will always be the potential for technical and compatibility issues when running on a non-native system through translation.

So doing this you get a gimped version of games.

The CMA also touched on this in their full report.

8.139 Using a Proton compatibility layer on a Linux-based cloud gaming service
may be a better alternative to porting, and it is already in use by some gaming
platforms. [] and [] [].
8.140 There are, however, limitations to Proton. The majority of games require
additional work to run well on Proton, with many not working at all, and it
needs to be maintained to keep up with updates to Windows or DirectX. The
presence of a compatibility layer can also reduce performance, and
complications can arise from anti-cheat software. Releasing games day and
date using Proton is also difficult given the additional work required. It is
possible that further investment and increased use of Proton in gaming could
reduce these limitations but that remains uncertain.

  • Page 231 (228), final report

https://assets.publishing.service.gov.uk/media/644939aa529eda000c3b0525/Microsoft_Activision_Final_Report_.pdf

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I think in the long-run they have to address the Monopoly that microsoft is creating for themselves , AGAIN. First they over-took every operating system out there by storm and consume 86%+ of the market and now they are on the hunt for the gaming industry.

So it is reasonable for the countries to block the aquisition. IMO it steals from the investors, regardless of their wallet size.

The only outcome of this should be to split up the companies and go from there.

If they made a power play they should turn over the core of Activision over to Microsoft and leave the Blizzard portion out of the deal and it would be a “settlement” to the issue. warcraft , Diablo, Hearthstone, Starcraft and Overwatch do NOT need Call of Duty Assets and Vice Versa. . So it would be the best route.

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I think people are a bit too loose with the word monopoly.

  • They aren’t going to be anywhere near as big on console hardware as Sony or Nintendo.
  • They aren’t going to be anywhere near as big as Steam or Epic Store on PC software.
  • They aren’t going to be anywhere near as big as Apple or Google on Mobile.
  • And on Cloud, there’s barely any market there, but Xbox is offering their entire library of games to any streaming service that wants it, with free licensing costs.