The UK’s antitrust watchdog announced today that it has narrowed its probe into Microsoft’s $68.7 billion bid for video game giant Activision Blizzard.
The Competition and Markets Authority (CMA) tentatively concluded in February that the merger “could harm UK gamers” through higher prices, less choice or less innovation. Today, the company updated its position, saying that new evidence “temporarily mitigates” concerns about its supply of game consoles in the UK.
However, previously published preliminary findings — the deal has raised concerns related to cloud gaming — remain unaffected. The investigation is ongoing and a final report from Watchdog is expected by April 26, 2023.
“The CMA has received a large body of new evidence in response to its initial preliminary findings. , the CMA’s research group has updated its preliminary findings and has reached the tentative conclusion that, overall, the transaction will not result in a material reduction in assets related to console gaming competition in the UK. ’” wrote in an update to the incident.
Watchdog said the most significant new evidence it received related to Microsoft’s financial incentives to make Activision’s games, including Call of Duty (CoD), exclusive to its own consoles. CMA’s initial analysis showed this strategy to be profitable in most scenarios, but new data (which provides better insight into CoD gamers’ actual purchasing behavior) suggests that this strategy is profitable in most scenarios. It shows that under a plausible scenario it would generate significant losses,” the CMA wrote. “Based on this, our updated analysis shows that making CoD exclusive to Xbox after the deal would not be commercially profitable for Microsoft, but instead Microsoft would continue to make the game available on PlayStation. I have an incentive to do so.”
In response to its preliminary findings, Microsoft has criticized the CMA’s analysis and financial modeling, saying that if it implements a “withholding strategy,” that is, by dedicating CoD to its own gaming consoles, the It claimed that it would withhold “substantial” earnings. Sony’s PlayStation title.
In addition, the CMA does not use the same time period as the “profit” calculation when calculating the lifetime value (“LTV”) and losses of potential Xbox-converting customers, which is fundamental to its financial model. claimed to have made a mistake. he used the gross profit figure for 5 years, and the ‘loss’ he calculated for 1 year only. Furthermore, it adds: Clearly there is no incentive to withhold once this error is fixed. “
The CMA has not publicly pointed out that the amount is incorrect. “New evidence” related to Microsoft’s financial incentives for Activision’s games only suggests that the tech giant would lose significantly if it withheld them from rival gaming consoles. It provides a tentative view that it is not a matter of concern.
“The most significant new evidence provided to the CMA relates to Microsoft’s financial incentives to create games for Activision. [CoD], exclusively for its own console, ”he wrote. “CMA’s initial analysis showed that this strategy was profitable in most scenarios, but new data (which provides better insight into the actual purchasing behavior of CoD gamers) suggests that this strategy Based on this, our updated analysis concludes that dedicating CoD to Xbox after the deal would not be commercially profitable for Microsoft, but instead It shows that Microsoft has an incentive to keep its games available on PlayStation.”
UK regulators have not amended their concerns about the impact of the deal on cloud gaming.We will continue to carefully consider the responses provided in relation to our original preliminary findings. “
In a statement, Martin Coleman, chair of the independent panel of experts investigating the CMA, added:
Preliminary findings are an important aspect of the merger process and are expressly designed to give the companies involved and interested third parties an opportunity to respond with new evidence before making a final decision. I’m here.
Considering the additional evidence provided, the merger would significantly reduce competition for console gaming services, as the costs to Microsoft of withholding Call of Duty from PlayStation would outweigh the benefits of taking such action. We have tentatively concluded that we will not.
Our tentative view that this transaction has caused concern in the cloud gaming market is unaffected by today’s announcement. Our investigation is in progress towards completion by the end of April.
Microsoft has previously called the CMA’s interim cloud gaming concerns “misguided,” saying it’s committed to a decade of partnerships with Nintendo and NVIDIA to bring CoD to more gamers on both consoles and cloud gaming services. in response to preliminary findings proposing a license agreement for the company, arguing that it means: UK gamers stand to reap the ‘big’ benefits if they are allowed to become Activision owners.
The company has been contacted for comment on the latest development.
