UK’s Competition and Markets Authority has sided with Microsoft in its concerns that Microsoft could take Call of Duty off PlayStation if it approves the Activision Blizzard agreement. The regulator is still concerned about the deal’s effect on cloud gaming markets and will conclude its investigation by April end.
“Having reviewed the additional evidence, we have now provisionally concluded the merger will not result a substantial decrease in competition in console gaming services,” Martin Coleman, chair of an independent panel of experts who conducted the CMA’s investigation.
Initially, the CMA had concluded that a Microsoft strategy of withholding Call of Duty would be financially profitable. Microsoft was not happy with this conclusion . In fact, publicly criticized the CMA’s financial modeling earlier in the month, arguing it was flawed.
The CMA has sided with Microsoft and adjusted its financial model.
Microsoft claimed it made “clear errors” in its financial model, which compared gains over five years to losses over a single year. CMA has updated its model and now admits that Microsoft could actually suffer financial losses if it withheld Call of Duty.
In a filing today, the CMA stated that it had reviewed the submissions of the Parties and third parties to our LTV model and modified them where necessary. Our updated results show that a total foreclosure strategy would result in a substantial net financial loss for the Parties, under all scenarios we considered possible.
Microsoft said it was happy for the CMA to correct its financial model. Rima Alaily (corporate vice president and deputy chief counsel for Microsoft), said in a statement to the Verge that “we appreciate the CMA’s thorough and thorough evaluation of evidence” and that the updated provisional findings were welcomed by the company. “This agreement will give more players more options in how they play Call of Duty, and their favourite games. We look forward working with the CMA in resolving any remaining concerns.”
Sony was the sole opponent to Microsoft’s deal. It stated in CMA filings last month that it was worried about Activision Blizzard’s proposed acquisition, and the future of Call of Duty. Sony stated that it is concerned that Microsoft might raise the price of Call of Duty and make it unavailable on its Xbox Game Pass subscription. This could also affect the performance and quality of Call of Duty on PlayStation.
Although the CMA has not yet responded to these concerns, it is clear that the regulator doesn’t care about Microsoft trying to withhold Call of Duty completely from PlayStation. Microsoft Gaming CEO Phil Spencer tried to resolve the Call of Duty debate on PlayStation once and for all in November. He stated definitively in an interview in The Verge, that the game would remain on PlayStation.
Microsoft and Sony could sign a deal on Call of Dutyon PlayStation, if the CMA takes a similar stance. Microsoft offered Sony a 10-year deal for Call of Duty but the PlayStation maker still has not signed the license. In its CMA filing last month, Sony stated that Microsoft had not demonstrated any commitment to reaching a negotiated result. They have been slow to engage, only engaging when they felt the regulatory outlook was getting darkening and preferred negotiating in the media to engaging with SIE.
Sony might have been waiting for the deal to be stopped, however. Jim Ryan, Sony’s PlayStation chief reportedly stated that the company was not interested in a deal to buy Microsoft. “I don’t want a new Call of Duty agreement. Ryan stated that he wanted to stop your merger on February 21st ( day of EU meetings), according Activision executive Lulu Cheng Meservey.
Activision Blizzard responded to today’s CMA. “The CMA’s revised provisional findings demonstrate an improved understanding and a commitment to players and competition,” states Meservey. “Sony’s attempt to block our merger won’t succeed. Microsoft has already provided effective and enforceable solutions to each of the remaining CMA concerns. We are confident that this deal will be a benefit to competition, innovation and consumers in the UK.
Microsoft has addressed one concern about Call of Duty. However, the CMA continues to investigate the effect of the deal on the cloud gaming industry. Coleman states that “our provisional view is that this deal raises concern in the cloud gaming industry and that it will not be affected by today’s announcement.” “Our investigation is on track to be completed by the end April.”
Microsoft recently signed cloud gaming agreements for its Xbox PC games in an attempt to win over regulators. To allow Xbox PC games on rival cloud gaming services, the Xbox maker has signed 10-year agreements with Boosteroid and Ubitus as well as Nvidia. If the deal is approved, it will also allow access to Call of Duty as well as other Activision games.
The Federal Trade Commission (FTC) and the European Commission are also looking into Microsoft. The FTC sued Microsoft to block Microsoft’s Activision Blizzard acquisition last year. That investigation is ongoing. This month that Microsoft’s Activision agreement is likely be approved by EU regulators. According to reports, the two major deals Microsoft made with Nintendo and Nvidia last week are likely to be approved by European regulators and help Microsoft close its $68.7billion deal.