• The CMA believes there will be a substantial lessening of competition should Microsoft acquire Activision Blizzard.
• Call of Duty is highlighted as a key property for all gaming platforms raising concerns about how much power it would bring to Microsoft’s catalogue.
• Microsoft promised it would keep Call of Duty on PlayStation.

The Competition and Markets Authority (CMA) in the UK this week published the full text of the first phase of its investigation into the proposed acquisition of Activision Blizzard by Microsoft.

The regulator began looking into the acquisition in July of this year to determine whether it would result in less competition with the UK market. You can read details of phase one of the investigation here.

“After examining a range of evidence, the CMA believes that the Merger meets the threshold for reference to an in-depth phase 2 investigation, giving rise to a realistic prospect of a substantial lessening of competition in gaming consoles, multi-game subscription services, and cloud gaming services,” the authority wrote.

The investigation puts Microsoft’s ever-growing dominance in the gaming market on full display. Yes, Microsoft is second to Sony in terms of revenue generated but, as the CMA points out, acquiring Activision Blizzard will likely close that gap, especially because of Call of Duty and the other properties the Irvine, California publisher has under its roof.

In the extensive report, Call of Duty is mentioned several times, once again making Microsoft’s comments that it’s not a “must-have” game seem very silly indeed. Even the regulator thinks so stating, “Call of Duty, in particular, is widely regarded as one of the most successful gaming franchises of all time. For more than a decade, its releases have ranked in the top games available on console and are expected to continue to do so.”

“The CMA is concerned that having full control over this powerful catalogue, especially in light of Microsoft’s already strong position in gaming consoles, operating systems, and cloud infrastructure, could result in Microsoft harming consumers by impairing Sony’s—Microsoft’s closest gaming rival—ability to compete as well as that of other existing rivals and potential new entrants who could otherwise bring healthy competition through innovative multi-game subscriptions and cloud gaming services,” the regulator added.

One of the many fears highlighted by the regulator regarding this acquisition is that Microsoft could withhold or degrade Activision Blizzard’s content on other platforms. Cloud gaming is also a concern as an emerging market. As Microsoft has something of a dominant position in that market, and it has the infrastructure to support cloud gaming, it’s a valid concern.

These concerns have resulted in a phase 2 investigation being requested.

Microsoft, isn’t taking this lying down though. In a statement to Ars Technica [pdf] the firm slams the CMA for making claims “without evidence or quantification of any effect”.

“The CMA’s theories of harm relate to one overarching concern: that Activision Blizzard’s game catalogue—in particular the Call of Duty franchise—will enable Xbox to foreclose its competitors in gaming markets. This concern is misplaced,” reads the statement sent to Ars Technica.

“Microsoft has no intention to take Call of Duty away from gamers and, indeed, it has publicly committed not to do so. The value of Call of Duty depends on its community of gamers, the majority of whom are on PlayStation. Keeping Call of Duty on PlayStation is, therefore, a commercial imperative for the Xbox business and the economics of the Transaction. As such, Microsoft has offered Sony a contractual commitment to continue supplying it with Call of Duty, including new releases with feature and content parity,” the statement continues.

Microsoft remains firm that this acquisition is a good thing not just for its business but for gamers, developers and the gaming industry as a whole.

We respectfully disagree and not because we side with Sony as it is doing the same thing as Microsoft albeit on a smaller scale. For example, Sony recently acquired Bungie for $3.7 billion. Since June 2021, Sony has acquired 10 video game developers including Housemarque, Nixxes Software, and Bluepoint Games.

These acquisitions are however quite small and likely don’t inspire full-scale investigation or attract the attention of regulators so much as the Activision Blizzard acquisition does.

The fact of the matter is that big publishers with seemingly endless pools of money are hoovering up every developer they can. This isn’t good for competition and we have to wonder when Sony pointing this out will come back to bite Sony in the rear.

The report of CMA’s phase 2 investigation will need to be submitted by March 2023 and, barring any other investigations, the acquisition will only be able to move forward after that, if at all.

[Image – Activision]