The UK’s competition regulator ruled that Microsoft’s purchase of Activision Blizzard, maker of Call of Duty, for a staggering 69 billion dollars would not affect competition in gaming consoles. This removes a major obstacle.
The Competition and Markets Authority has revealed that Microsoft would not be able to make Call of Duty exclusive to its Xbox console. Instead, it would have incentive to keep the game available on PlayStation.
However, the regulator said that it was still assessing the effect of the deal on cloud gaming markets.
Regulators in Europe and the United States are still monitoring the takeover, which is the largest in gaming history.
CMA had observed Activision’s “Call of Duty”, a flagship franchise, was crucial in driving competition among consoles. It worried that Microsoft could profit by making the game only available to Xbox or PlayStation under significantly worse conditions.
Microsoft has since offered Sony a license deal to address these concerns.
“Our provisional view, that this deal raises concern in the cloud gaming marketplace is not affected by today’s announcement,” said the CMA. It also stated that the CMA’s overall investigation was on track to be completed by the April 26 deadline.
“Based on this analysis, it is now clear that Microsoft would not make CoD exclusive for Xbox after the deal. However, Microsoft will still have an incentive to keep the game available on PlayStation.”
Microsoft had criticised the CMA’s financial modeling and analysis in a reply to the provisional results. It argued that if it implemented a “withholding strategy”, it would forfeit “substantial” revenue from the title on Sony’s PlayStation.
It also claimed that the CMA made a fundamental error in its financial modeling, not using the same period for calculating the Lifetime Value (“LTV”) (of customers who might divert to Xbox) as the gains. The ‘gain’ calculation used five-year gross profits figures while the loss’ calculation was only for one year. The results are distorted when you compare gains over a five-year period to losses over a single year. Microsoft stated that once this error has been corrected, it becomes clear that there is no incentive for investors to withhold.
The CMA hasn’t publicly admitted to having its numbers wrong. The CMA just stated that “new evidence” regarding Microsoft’s financial incentives surrounding Activision’s gaming consoles suggests that the tech giant would be significantly less successful if it withheld them. It is now stating that this is not a concern for competition.
The UK regulator said that it has not changed its concerns about the deal’s effect on cloud gaming and is “continuing with careful consideration of the responses in relation to the initial provisional findings”.
Microsoft had previously called the CMA’s provisional concerns about cloud gaming “misplaced,” and argued in its response to the provisional findings. It argued that ten-year licensing arrangements — with Nintendo and NVIDIA, to bring CoD to more players on both consoles and cloud gaming services — would mean that UK gamers stand “significantly” to benefit if Activision is allowed to become the owners of Activision.
