Why Microsoft’s biggest deal may be in ‘trouble’ – Times of India

Federal Trade Commission (FTC) of the United States, on Thursday, moved to court against Microsoft’s acquisition of Activision Blizzard, a deal worth $68.7 billion. The regulator said the purchase would allow the Redmond-based tech giant to suppress competition to its Xbox consoles and “rapidly growing’ subscription-based cloud-gaming business.
The Commission voted 3-1 to issue the complaint, with FTC Commissioner Christine S. Wilson voting no.
Why does the US government want to block Microsoft’s purchase of Activision
In the complaint, the government agency notes that Microsoft, in the past, has acquired developers and used their ‘valueable gaming content’ to quash competition from rival consoles, stating Microsoft’s purchase of ZeniMax, the parent company of game developer Bethesda.
Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition
In 2021, Microsoft purchased Zenimax for $7.5 billion, thus acquiring Bethesda and all of its IPs, making Starfield and Redfall, two of its most popular titles, Microsoft-exclusive. The regulator notes that the company did this despite assuring European antitrust authorities that “it had no incentive to withhold games from rival consoles,” and European Commission’s statement cited the same.
Unlike Bethesda’s pre-Microsoft acquisition era games, Elder Scrolls and Fall out, Bethesda and Microsoft’s Starfiled will not be coming on the Sony PlayStation and will arrive “exclusively on Xbox Series X|S and PC.”
Activision Blizzard, according to the FTC, “is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple device, including video game consoles, PCs, and mobile devices.”
Call of Duty, World of Warcraft, Diablo, and Overwatch are some of Activision’s most popular titles that garner millions of active users monthly.
As per the US regulator, the studio plans to offer its games on “many devices,” but things could change if the Microsoft Activision deals go through.
The agency says in the press release that upon acquisition, “Microsoft would have both the means and motive to harm competition” by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.”
“Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets,” Vedova added further.
What Microsoft has to say about the FTC’s vote
“We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” Brad Smith, Vice Chair and President of Microsoft, said in a tweet, responding to agency’s complaint.
Microsoft Activision merger under heavy scrutiny also in Europe
The antitrust regulators in Europe and the Markets Authority of the UK have been heavily investigating the Microsoft-Activision deal, and both bodies think that Microsoft would leverage its position post-acquisition to harm competition in the market.
“In particular, the Commission is concerned that, by acquiring Activision Blizzard, Microsoft may foreclose access to Activision Blizzard’s console and PC video games, especially to high-profile and highly successful games (so-called ‘AAA’ games) such as ‘ Call of Duty’,” reads the release from European Commission.
Meanwhile, UK’s Market Authority, which has been actively investigating the merger, also expressed concerns that the acquisition would allow Microsoft to restrict the valuable content of Activision from other platforms, primarily PlayStation.
However, Microsoft has been trying to convince regulators, saying that they want the game to be available to an even larger audience than before.
Earlier this week, Microsoft entered a 10-year agreement with Nintendo, offering to make Call of Duty available on Nintendo. consoles post its merger with Activision, announced Spencer. Further, he also announced a commitment to keep Call of Duty available on Steam alongside Xbox.
In a Wall Street Journal piece on Monday, Brad Smith wrote that FTC suing Microsoft to block Activision’s purchase would be a “huge mistake,” adding that it would hurt “competition, customers and thousands of game developers.”
In a letter to Activision Blizzard employees, CEO Bobby Kotick told staff that the deal would close and said that the allegation that the deal is “anticompetitive” is not true, further adding, “we believe we’ll win this challenge.” when FTC challenges the deal in the court.
Why is in for Sony in all this
Sony, who claims to be taking a huge toll if the deal closes, has also even called for a regulatory veto. Microsoft had offered Sony to extend the current deal for three years, but Sony rejected the offer, saying it was “inadequate on so many levels.”
Microsoft said it also proposed to Sony a similar 10 year deal as Nintendo, offering to release each upcoming Call of Duty title on PlayStation on the same day as Xbox, but Sony declined the same.
Smith finds Sony to be the “loudest objecter” of the deal.
Now, if FTC succeeds in blocking the deal, Sony would continue to remain in the second position as a video game company, and Microsoft would lose out on the additional revenue it had hoped for after Activision’s acquisition. So, it would be a win for Sony. But, it would be a huge loss for Activision employees, who were in the hope of a reorganisation.
But it is yet to see what happens next.