The Microsoft / Activision Blizzard acquisition |OT| Antitrust Simulator (completed; discussing post-merger issues)

[Maledict]

I would be interested to see some professionals talk about whether ringfencing is possible and how it might work in this case. That seems like probably the best path forward for MS at this point if they still want to do the deal and it also might sidestep future M&A issues they would face against the CMA.

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Remedies are not applicable now. The deal has been blocked. There are no further negotiations. The only option Ms has if their appeal fails would to be to completely withdraw from the U.K. in all respects. Which they can't for various reasons, not the least being they are tied into U.K. defence contracts.

 

[Tsunami561]

Any examples of ringfencing in tech?

 

[Alek]

View: https://twitter.com/PolitlcsUK/status/1651342517458071553

Hey Activison:
"The Competition and Markets Authority (CMA) is an independent non-ministerial department."

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This seems like rhetoric, rather than the other way around. In what way does this make the UK closed for business? For a long time, the UK has been successfully investing in game development education which has enabled the UK to thrive in the game development industry in Europe. London is a hotspot for game development, and it also pays some of if not the best salaries in Europe.

The idea that blocking the merger somehow spoils this, is just silly. Provided the UK keeps investing in high quality education that encourage enables people to skill up to be able to produce great games, the UK will thrive as a space for game development.

Additionally, there are plenty (most) game development businesses and acquisitions that the CMA do not believe hurt competition or consumers.

I also think, and I said this earlier in the thread that this type of attitude where they seek to make the CMA and the UK look silly and stupid publicly, will backfire. This is not going to foster any goodwill or increased likelihood that the CMA change their attitudes towards the deal. If anything it risks the opposite.

 

[Jarmel]

Remedies are not applicable now. The deal has been blocked. There are no further negotiations. The only option Ms has if their appeal fails would to be to completely withdraw from the U.K. in all respects. Which they can't for various reasons, not the least being they are tied into U.K. defence contracts.

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My understanding is that they still could do it but it would have to be signed off on by some entity in the UK, maybe the CMA. Other companies do this to bypass regulatory bodies too.

 

[Yoga Flame]

If the bar is e.g. irrationality, I don't think a quibble over marketshare calculation would stand up for long in an appeal. The CMA even addresses that second point Rietvalt makes - it concedes that the market share calculations outlined are debatable, and that the numbers might be different if xcloud was a standalone service, but that this isn't their wider point or what their concern hinges on.





So would the CAT deem the concern irrational when it by the CMA's own admission doesn't depend on the marketshares of today?

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Thanks for those quotes, their judgement is even worse than I thought. They admit they can't predict, nor can they accurately quantify what, or if any impact will be, but MS being megatech is the evidence enough to conclude the market is in danger. Indeed I do think MS can make a strong case against CMA 'gut' feeling over evidence to CAT.

 

[The Lord of Cereal]

Who is going to buy a console SC3? Y'all are just wildin.

Maybe like a StarCraft TPS ala Battlefront, with 3 factions, but a RTS isn't going to transfer well to console without changing the key gameplay and turning off the main audience which is already niche.

Click to shrink...

Tbh I feel like you could say the same thing about Age of Empires 2 and soon Age of Empires 4 not being able to adapt well to consoles but from my understanding the Age of Empires 2 port works incredibly well on controller and also had some pretty solid engagement too.

If the deal were to go through I'd be very surprised if we didn't see Warcraft and Starcraft console ports in the vein of those Age of Empires ports

 

[Flavius]

I also think, and I said this earlier in the thread that this type of attitude where they seek to make the CMA and the UK look silly and stupid publicly, will backfire. This is not going to foster any goodwill or increased likelihood that the CMA change their attitudes towards the deal. If anything it risks the opposite.

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I really could not agree with this more. Says it all, really.

 

[Yoga Flame]

This seems like rhetoric, rather than the other way around. In what way does this make the UK closed for business? For a long time, the UK has been successfully investing in game development education which has enabled the UK to thrive in the game development industry in Europe. London is a hotspot for game development, and it also pays some of if not the best salaries in Europe.

The idea that blocking the merger somehow spoils this, is just silly. Provided the UK keeps investing in high quality education that encourage enables people to skill up to be able to produce great games, the UK will thrive as a space for game development.

Additionally, there are plenty (most) game development businesses and acquisitions that the CMA do not believe hurt competition or consumers.

I also think, and I said this earlier in the thread that this type of attitude where they seek to make the CMA and the UK look silly and stupid publicly, will backfire. This is not going to foster any goodwill or increased likelihood that the CMA change their attitudes towards the deal. If anything it risks the opposite.

Click to shrink...

Rather sanguine of you. 10+ years of Tory sabotage has done huge damage to our country and it's ability to compete with the rest of EU. ATVI aren't wrong but it's not solely due to this deal. London has lost substantial amount of its services for instance thanks to Brexit. We're barely accomodating and supporting green technology that the rest of the word is actively pivoting to, business want to move out as the scope is limited here. We're certainly in downward spiral in terms business prospects.

 

[Trup1aya]

Yet it is. Those being regulated don't get to make their own rules for assuaging regulatory concern. You think government is just going to say "oh yeah, we'll also take on the task of ensuring compliance and deal with the ramifications of breach" when they already have codified the rules by which they operate?

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You're really confused about the process. Those being regulated are required to explain how they would assuage regulatory concern. So I'm not sure what you mean when you say they don't get to make their own.

The government told MS they have some concerns and asked MS how they would address those concerns. One of the acceptable ways to address those concerns is to bake-in relevant benefits that outweigh the concerns that were raised and/or disincentivize the behaviors that regulators are concerned about.

Legally mandated Licensing all of ABKs content to B2P cloud providers was reasonably thought to be remedy with obvious Relevant Benefits that would not exist without the merger that also outweigh the possibility of ABK being withheld from cloud more than it already is.

Governments take on the task of ensuring compliance all the time. That's literally a role of government. and in this case ensuring compliance isn't even difficult. If MS' games were ever unavailable on services that they were required to be available to, it wouldn't be a secret.

 

[Y2Kev]

Any CMA appeal that centers on the merits of the case I think will fail.

 

[RetroFart]

I think a new thread with a poll should be made to see which will come first - the end of this drama (since it appears MS/Acti will appeal) or the Switch 2

 

[FlyStarJay]

My heart goes out to all the staff in Activision Blizzard who were so desperately hoping for this deal to go ahead, so they could get a seat at the table of improving their unspeakably toxic workplace.

It's so sad that the human factor has been completely ignored here, despite pleas from staff and unions alike. What a world we live in.

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Serious question; how is it the UK's competition and market authority's business to look after the wellbeing of employees in the US? Doesn't the US have a government that can and should fix the issue? Why should Uk interfer with that?

The CMA's business is to look after consumers in the UK.

 

[mangrilla]

Not impossible though. JD Sports quite famously finally pushed through their situation fairly recently after 3 years of battling, but that case was far far messier than this situation.

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Wait am I missing something in reading about this situation? JD Sports appealed a CMA ruling, they won their appeal which got remitted to the CMA who still forced them to sell off Footasylum at a loss of millions of pounds, no? And then they also got fined for violating CMA orders. And then for price fixing. And fired their CEO over those "regulatory issues."

They don't seem to be a very good example of overcoming the CMA.

 

[LilScooby77]

Any CMA appeal that centers on the merits of the case I think will fail.

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Yeah the CMA have to duck up for anyone to have a way of challenging their views.

 

[Randy Savage]

Who is going to buy a console SC3? Y'all are just wildin.

Maybe like a StarCraft TPS ala Battlefront, with 3 factions, but a RTS isn't going to transfer well to console without changing the key gameplay and turning off the main audience which is already niche.

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They managed to do age of empires and it plays great. They can def do StarCraft. Rts games work on consoles they may not be super popular but they def have a fanbase of people that like to play on console

 

[Pancracio17]

If MS wants to appeal to irrationality, they could debate the premise of cloud gaming staying an extension of console gaming once the market matures. Isnt Kojima's cloud gaming coming? And dont xCloud users gravitate to different kinds of games than native players? Assuming that cloud gaming will have the same tastes as console seems pretty dumb to me.

 

[Flavius]

You're really confused about the process. Those being regulated are required to explain how they would assuage regulatory concern. So I'm not sure what you mean when you say they don't get to make their own.

The government told MS they have some concerns and asked MS how they would address those concerns. One of the acceptable ways to address those concerns is to bake-in relevant benefits that outweigh the concerns that were raised and/or disincentivize the behaviors that regulators are concerned about.

Licensing all of ABKs content to B2P cloud providers was reasonably thought to be remedy with obvious Relevant Benefits that would not exist without the merger.

Governments take on the task of ensuring compliance all the time. That's literally a role of government. and in this case ensuring compliance isn't even difficult. If MS' games were ever unavailable on services that they were required to be available to, it wouldn't be a secret.

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The remedy

Microsoft submitted a proposal to address some of these concerns which the CMA examined in considerable depth. The proposed remedy set out requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.

Such remedies are described as 'behavioural' because they seek to regulate the behaviour of the businesses involved in a merger, requiring them to behave in a way which may be contrary to their commercial incentives. This therefore takes the form of a type of ongoing regulation of the sector, replacing market forces in a growing and dynamic market with mandated regulatory obligations ultimately overseen, and enforced by, the CMA – in this case at a global level.

Microsoft's proposal contained a number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services:

• It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
• It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
• It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market.

Accepting Microsoft's remedy would inevitably require some degree of regulatory oversight by the CMA. By contrast, preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention.

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I mean, you can argue with me here all you want, though there's a point at which I'll just not respond. But here's the text from CMA's release where they expressly spell it out themselves. Have at it.

For context, I've previously held government office charged with enforcing statute and administrative code. Again, not apples to apples per se but I do know a bit of which I speak.

 

[PianoBlack]

Maybe they could spend $69B on starting up some game development studios from scratch, or at least from pre-existing small teams of promising devs.

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MS has started numerous studios and put lots of investment into their existing studios. This narrative that they just buy studios and neglect them isn't really grounded in reality that I can see.

Turn 10
343
The Coalition
The Initiative
Playground St Albans (sister studio for Fable)
InXile New Orleans
Undead Labs Orlando and Champaign
Substantial internal growth at Obsidian, Ninja Theory, Compulsion etc. since the acquisitions

Or, if that wasn't your implication, apologies - and yes I do hope they take a chunk of that money and use it for additional investment in game production.

 

[Lowrys]

Legally mandated Licensing all of ABKs content to B2P cloud providers was reasonably thought to be remedy with obvious Relevant Benefits that would not exist without the merger that also outweigh the possibility of ABK being withheld from cloud more than it already is.

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And while rejecting MS proposed solution of licensing ABK games to competing cloud gaming services, the CMA simultaneously recommends that MS could license games as a less competitive measure to compete with Google and Apple stores, which it essentially admits have a duopoly and can't realistically be challenged. You couldn't make it up.

 

[Contramann]

What is the point if you're going to lose at the end? Wouldn't it make more sense to put that time and effort into something more positive?

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Shareholders expect them to fight the decision. Also, like others said, they sunk cost into this already.

 

[Capt Sensib1e]

If MS wants to appeal to irrationality, they could debate the premise of cloud gaming staying an extension of console gaming once the market matures. Isnt Kojima's cloud gaming coming? And dont xCloud users gravitate to different kinds of games than native players? Assuming that cloud gaming will have the same tastes as console seems pretty dumb to me.

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Is mainline CoD even playable on the cloud? Jeez this decision is just wrong in so many ways.

 

[ty_hot]

Some people really think Microsoft makes business decision with the player's best interest in mind lol. Their PR really is great, I guess some people believe Phil is some form of savior idk.

I think it is hard to say for sure that cloud is the future of gaming but when every new gen of cellular gets faster and with less ping and one cloud console can serve multiple people at a small entry cost then it is safe to say that cloud is possibly the future of gaming (as in lots of people might depend on it to play in a decade). From there to "if Microsoft gets Activision the cloud space will be a monopoly" there is a considerable distance and I also think that if that was the case they could decide Microsoft had to do something permanently (the 10 year deals they were signing were an admission that on year 11 their actual plans would be what happened to Bethesda).

 

[Capt Sensib1e]

Some people really think Microsoft makes business decision with the player's best interest in mind lol. Their PR really is great, I guess some people believe Phil is some form of savior idk.

I think it is hard to say for sure that cloud is the future of gaming but when every new gen of cellular gets faster and with less ping and one cloud console can serve multiple people at a small entry cost then it is safe to say that cloud is possibly the future of gaming (as in lots of people might depend on it to play in a decade). From there to "if Microsoft gets Activision the cloud space will be a monopoly" there is a considerable distance and I also think that if that was the case they could decide Microsoft had to do something permanently (the 10 year deals they were signing were an admission that on year 11 their actual plans would be what happened to Bethesda).

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Tell that to Google and its billions of dollars.

 

[Lowrys]

Is mainline CoD even playable on the cloud? Jeez this decision is just wrong in so many ways.

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The important thing, according to CMA, is that it might be available on cloud in the indeterminate future, on whatever terms ABK dictate; and that possibility is somehow more appealing than the certainty of it being available on cloud services now on favourable terms from MS.

 

[Sirhc]

Tbh I feel like you could say the same thing about Age of Empires 2 and soon Age of Empires 4 not being able to adapt well to consoles but from my understanding the Age of Empires 2 port works incredibly well on controller and also had some pretty solid engagement too.

If the deal were to go through I'd be very surprised if we didn't see Warcraft and Starcraft console ports in the vein of those Age of Empires ports

Click to shrink...

Main thing being if the deal somehow goes through, people were saying MS should just fund a SC3 if it doesn't for... reasons??

If the deal makes it I can't imagine they wouldn't ensure a console version of everything going forward, hell revive HotS as a console MOBA while they are at it.

 

[Trup1aya]

I mean, you can argue with me here all you want, though there's a point at which I'll just not respond. But here's the text from CMA's release where they expressly spell it out themselves. Have at it.

For context, I've previously held government office charged with enforcing statute and administrative code. Again, not apples to apples per se but I do know a bit of which I speak.

Click to shrink...

Right, this demonstrates that the regulated parties are required to come up with remedies- which flies in the face of your assertion that MS' attempt to come up with remedies was some performative act rather than MS proposing actionable self-limitations on their behaviors as required by market authorities.

Ultimately, the CMA found the proposal inadequate (for weak reasons : ABKs games aren't on multi-game services or non-windows PC platforms so why would the merger need to address this, and how would a lack of a merger improve this situation? ). But again, the CMAs ultimate opinion doesn't retroactively make the proposal performative nor does it somehow make your assumptions about what MS would have done W/o regulator intervention relevant

 

[Shepherd]

MS has started numerous studios and put lots of investment into their existing studios. This narrative that they just buy studios and neglect them isn't really grounded in reality that I can see.

Turn 10
343
The Coalition
The Initiative
Playground St Albans (sister studio for Fable)
InXile New Orleans
Undead Labs Orlando and Champaign
Substantial internal growth at Obsidian, Ninja Theory, Compulsion etc. since the acquisitions

Or, if that wasn't your implication, apologies - and yes I do hope they take a chunk of that money and use it for additional investment in game production.

Click to shrink...

From all the studios that you listed, after MS acquisition, we basically got 1 new Forza, 1 new Halo and 1 new Gears game in the last 5 years.

 

[Deleted member 129418]

From all the studios that you listed, after MS acquisition, we basically got 1 new Forza, 1 new Halo and 1 new Gears game in the last 5 years.

Click to shrink...

also pentiment, grounded :D

 

[Idas]

I was just skimming through the final report, and there is a lot to unpack here.

A few examples:

The remedies offered to the CMA were different to the the ones offered to the EC (page 351)

Microsoft told us that the revised details of the Microsoft Cloud Remedy set out in its response to the Remedies Working Paper were consistent with the revised remedy proposal which had been put forward to the European Commission, but that Microsoft's proposal to the CMA went beyond the proposed commitments to the European Commission in certain respects in order to address the CMA's specific concerns set out in the Remedies Working Paper.

No one can predict the evolution of the cloud gaming market: the CMA, MS, ABK or third parties 🤔 (page 368)

Cloud gaming is an early-stage and growing dynamic market, and there is considerable uncertainty as to how it will develop and what competing business models will emerge. We believe, for the reasons set out in detail in Chapter 8, that foreclosure of Microsoft's rivals in cloud gaming services may be expected to result in substantial harm to competition in this market. We recognise that we cannot predict with any certainty how exactly the market might evolve absent the Merger (or if the Merger is allowed to proceed on the basis of the Microsoft Cloud Remedy). Neither, in our view, can the Parties or third parties. We consider this represents an inherent specification risk in the Microsoft Cloud Remedy – even if the remedy could be well-specified to cover the current status of the market, it may not be suited to future changes. This means that we cannot have a high degree of confidence that the terms of the remedy would be sufficiently well-specified to address these unpredictable market changes.

COD could make Nintendo (Switch) a closer competitor to Xbox (page 389)

We have concluded in Chapter 7 that Microsoft would not have the incentive to foreclose rival console gaming services in the UK. However, this is not determinative of whether Microsoft has a commercial incentive to develop and publish native CoD titles for Nintendo. This would involve substantial costs that would need to be recouped through additional sales of native versions of CoD on Nintendo. In addition, placing valuable CoD content on Nintendo would in principle increase diversion away from Xbox and towards Nintendo. While this effect may be relatively limited given our findings in Chapter 7 that Nintendo competes less closely with Xbox, making CoD on Nintendo could make it a closer competitor to Xbox, which we consider would not be in Microsoft's interest. The Parties have not provided us with convincing evidence of the expected costs, revenues and profitability that might inform an assessment of Microsoft's commercial incentives in this respect.

Predicting the evolution of COD and customer behaviour in ten years is hard (page 391)

The agreement has a ten-year term. We consider that account must be made for the inherent uncertainty over the scale of the benefits over time. The likelihood of the assumptions remaining constant will decrease over time, and the changing nature of the console market makes it harder to make any predictions about how a particular retail product (for example, CoD [REDACTED]) might evolve, or how customer behaviour might develop. As such, it is not a reasonable assumption that any annual benefit would remain constant over the term of the agreement. Instead, in our view the benefits are likely to decline significantly (and certainly at a rate greater than the 'risk-free' rate used in Microsoft's NPV calculation) over time, reducing our confidence that they can be expected to be realised.

MS has tried to buy at least one mobile games publisher (page 394)

We note Microsoft's submission that Activision has significant strength in mobile gaming, and consider that the presence of Activision's games on any mobile gaming store would enhance its competitiveness. However, we also consider that this could be achieved by less anti-competitive means than the Merger, and Microsoft could acquire 'attractive content and experience with player engagement and acquisition' by buying a different mobile games publisher. This appears to have been Microsoft's strategy – it attempted to buy [REDACTED] in [REDACTED], and said [REDACTED].

A lot more coming this weekend!

 

[tomwarren]

Handsome - for sure - but also lucky :-)

Up until February this year the CMA was still super focussed on COD. As a reminder, the very first structural remedy they suggested was the sale of COD as a business (Para 14):-

https://assets.publishing.service.gov.uk/media/63e376bdd3bf7f173ad1cee4/Notice_of_possible_remedies_2.0.pdf

I totally agree that the focus *should* have been on Cloud, not COD, but that wasn't the way the CMA (or Sony) were going for 8 months out of this 10 month process.

Click to shrink...

Not sure that's strictly true. The cloud concerns have always been lingering in the background, but everyone has been writing about Call of Duty instead. They highlighted similar concerns back in September about Microsoft's cloud infrastructure and Windows dominance.

 

[Flavius]

Right, this demonstrates that the regulated parties are required to come up with remedies- which flies in the face of your assertion that MS' attempt to come up with remedies was some performative act rather than MS proposing actionable self-limitations on their behaviors as required by market authorities.

Ultimately, the CMA found the proposal inadequate (for weak reasons : ABKs games aren't on multi-game services or non-windows PC platforms so why would the merger need to address this, and how would a lack of a merger improve this situation? ). But again, the CMAs ultimate opinion doesn't retroactively make the proposal performative nor does it somehow make your assumptions about what MS would have done W/o regulator intervention relevant

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I read it. I saw it. Cheers to you. Now let's see how this all plays out. ;)

 

[PianoBlack]

From all the studios that you listed, after MS acquisition, we basically got 1 new Forza, 1 new Halo and 1 new Gears game in the last 5 years.

Click to shrink...

Huh? I was listing studios they have started from scratch over the years and studios they have notably expanded after acquisition, since I've seen people saying they need to invest in new/expanded studios as though they don't already do that.

Not sure why you're bring up Halo and Gears?

If you're trying to list games their acquired studios have released you missed almost all of them.

 

[Shepherd]

Huh? I was listing studios they have started from scratch over the years and studios they have notably expanded after acquisition, since I've seen people saying they need to invest in new/expanded studios as though they don't already do that.

Not sure why you're bring up Halo and Gears?

If you're trying to list games their acquired studios have released you missed almost all of them.

Click to shrink...

I'm not disagreeing with you but I was talking about the studios that you listed. 8 studios. 3 new games from stablished IPs the last 5 years. If their new studios had a nice, healthy output, be sure you wouldnt be hearing about how bad their first party situation is.

 

[RedRum]

Look at you, getting all frothy.

A "Pissed-off microsoft".. my dude, this is big tech business, not kindergarten. They have a million calculated contingencies lined up and I bet you that an ego-fuelled buying tantrum is not one of them.

Click to shrink...

My dude.. I'm a Project Manager for Lockheed Martin with a Software Engineering and Integration background. Worked on the F-35 at LM Aero before moving to Missile Defense. Before that, I was Aviation Training Management for the Marines and worked right alongside the maintenance department of the USMC's F-5 unit that was 100% supported by civilian Sikorsky employees and was part of Lockheed's acquisition of that company. Obviously I was also around for Lockheed's failed attempt at acquiring Aerojet courtesy of the FTC.

Would it make you feel better if I said that Microsoft management aren't literally punching holes in walls when it comes to "Pissed-off Microsoft", but just an "aggressive Microsoft" like I mentioned later in the same post. Also, why wouldn't they continue spending to acquire talent?

I know you know about big tech business, so please educate me.

 

[Trup1aya]

Some people really think Microsoft makes business decision with the player's best interest in mind lol. Their PR really is great, I guess some people believe Phil is some form of savior idk.

I think it is hard to say for sure that cloud is the future of gaming but when every new gen of cellular gets faster and with less ping and one cloud console can serve multiple people at a small entry cost then it is safe to say that cloud is possibly the future of gaming (as in lots of people might depend on it to play in a decade). From there to "if Microsoft gets Activision the cloud space will be a monopoly" there is a considerable distance and I also think that if that was the case they could decide Microsoft had to do something permanently (the 10 year deals they were signing were an admission that on year 11 their actual plans would be what happened to Bethesda).

Click to shrink...

No one thinks MS' actions are altruistic.

They just see that the relevant consumer benefits of the deal + the proposed remedies outweigh any reasonable concerns. Sometimes, a company exhibiting a widely beneficial behavior happens to be what would make them the most money.

 

[super-heated plasma]

I dont get how one country can block a sale like this when all other countries approve it? I would get it if the majority countries voted no.

 

[Afrikan]

Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market.

Click to shrink...

THAT is what I was looking for earlier in someone's post. Thanks Flavius So can anyone explain this part more? Give a real world example/scenario?

 

[groganos]

I was just skimming through the final report, and there is a lot to unpack here.

A few examples:

The remedies offered to the CMA were different to the the ones offered to the EC (page 351)

Microsoft told us that the revised details of the Microsoft Cloud Remedy set out in its response to the Remedies Working Paper were consistent with the revised remedy proposal which had been put forward to the European Commission, but that Microsoft's proposal to the CMA went beyond the proposed commitments to the European Commission in certain respects in order to address the CMA's specific concerns set out in the Remedies Working Paper.

No one can predict the evolution of the cloud gaming market: the CMA, MS, ABK or third parties 🤔 (page 368)

Cloud gaming is an early-stage and growing dynamic market, and there is considerable uncertainty as to how it will develop and what competing business models will emerge. We believe, for the reasons set out in detail in Chapter 8, that foreclosure of Microsoft's rivals in cloud gaming services may be expected to result in substantial harm to competition in this market. We recognise that we cannot predict with any certainty how exactly the market might evolve absent the Merger (or if the Merger is allowed to proceed on the basis of the Microsoft Cloud Remedy). Neither, in our view, can the Parties or third parties. We consider this represents an inherent specification risk in the Microsoft Cloud Remedy – even if the remedy could be well-specified to cover the current status of the market, it may not be suited to future changes. This means that we cannot have a high degree of confidence that the terms of the remedy would be sufficiently well-specified to address these unpredictable market changes.

COD could make Nintendo (Switch) a closer competitor to Xbox (page 389)

We have concluded in Chapter 7 that Microsoft would not have the incentive to foreclose rival console gaming services in the UK. However, this is not determinative of whether Microsoft has a commercial incentive to develop and publish native CoD titles for Nintendo. This would involve substantial costs that would need to be recouped through additional sales of native versions of CoD on Nintendo. In addition, placing valuable CoD content on Nintendo would in principle increase diversion away from Xbox and towards Nintendo. While this effect may be relatively limited given our findings in Chapter 7 that Nintendo competes less closely with Xbox, making CoD on Nintendo could make it a closer competitor to Xbox, which we consider would not be in Microsoft's interest. The Parties have not provided us with convincing evidence of the expected costs, revenues and profitability that might inform an assessment of Microsoft's commercial incentives in this respect.

Predicting the evolution of COD and customer behaviour in ten years is hard (page 391)

The agreement has a ten-year term. We consider that account must be made for the inherent uncertainty over the scale of the benefits over time. The likelihood of the assumptions remaining constant will decrease over time, and the changing nature of the console market makes it harder to make any predictions about how a particular retail product (for example, CoD [REDACTED]) might evolve, or how customer behaviour might develop. As such, it is not a reasonable assumption that any annual benefit would remain constant over the term of the agreement. Instead, in our view the benefits are likely to decline significantly (and certainly at a rate greater than the 'risk-free' rate used in Microsoft's NPV calculation) over time, reducing our confidence that they can be expected to be realised.

MS has tried to buy at least one mobile games publisher (page 394)

We note Microsoft's submission that Activision has significant strength in mobile gaming, and consider that the presence of Activision's games on any mobile gaming store would enhance its competitiveness. However, we also consider that this could be achieved by less anti-competitive means than the Merger, and Microsoft could acquire 'attractive content and experience with player engagement and acquisition' by buying a different mobile games publisher. This appears to have been Microsoft's strategy – it attempted to buy [REDACTED] in [REDACTED], and said [REDACTED].

A lot more coming this weekend!

Click to shrink...

PG 266 of the final report the (a.) Section is an interesting little footnote from January 2021 from an investment advisor concerning Microsoft investing in electronic arts, take two, & activision. Activision was the best positioned for their coverage space with regard to broader gaming industry trends. Hey thanks for all the hard work and sorry if you're stuck here for another year as it goes through the cat process.

 

[RedRum]

I was just skimming through the final report, and there is a lot to unpack here.

A few examples:

The remedies offered to the CMA were different to the the ones offered to the EC (page 351)

Microsoft told us that the revised details of the Microsoft Cloud Remedy set out in its response to the Remedies Working Paper were consistent with the revised remedy proposal which had been put forward to the European Commission, but that Microsoft's proposal to the CMA went beyond the proposed commitments to the European Commission in certain respects in order to address the CMA's specific concerns set out in the Remedies Working Paper.

No one can predict the evolution of the cloud gaming market: the CMA, MS, ABK or third parties 🤔 (page 368)

Cloud gaming is an early-stage and growing dynamic market, and there is considerable uncertainty as to how it will develop and what competing business models will emerge. We believe, for the reasons set out in detail in Chapter 8, that foreclosure of Microsoft's rivals in cloud gaming services may be expected to result in substantial harm to competition in this market. We recognise that we cannot predict with any certainty how exactly the market might evolve absent the Merger (or if the Merger is allowed to proceed on the basis of the Microsoft Cloud Remedy). Neither, in our view, can the Parties or third parties. We consider this represents an inherent specification risk in the Microsoft Cloud Remedy – even if the remedy could be well-specified to cover the current status of the market, it may not be suited to future changes. This means that we cannot have a high degree of confidence that the terms of the remedy would be sufficiently well-specified to address these unpredictable market changes.

COD could make Nintendo (Switch) a closer competitor to Xbox (page 389)

We have concluded in Chapter 7 that Microsoft would not have the incentive to foreclose rival console gaming services in the UK. However, this is not determinative of whether Microsoft has a commercial incentive to develop and publish native CoD titles for Nintendo. This would involve substantial costs that would need to be recouped through additional sales of native versions of CoD on Nintendo. In addition, placing valuable CoD content on Nintendo would in principle increase diversion away from Xbox and towards Nintendo. While this effect may be relatively limited given our findings in Chapter 7 that Nintendo competes less closely with Xbox, making CoD on Nintendo could make it a closer competitor to Xbox, which we consider would not be in Microsoft's interest. The Parties have not provided us with convincing evidence of the expected costs, revenues and profitability that might inform an assessment of Microsoft's commercial incentives in this respect.

Predicting the evolution of COD and customer behaviour in ten years is hard (page 391)

The agreement has a ten-year term. We consider that account must be made for the inherent uncertainty over the scale of the benefits over time. The likelihood of the assumptions remaining constant will decrease over time, and the changing nature of the console market makes it harder to make any predictions about how a particular retail product (for example, CoD [REDACTED]) might evolve, or how customer behaviour might develop. As such, it is not a reasonable assumption that any annual benefit would remain constant over the term of the agreement. Instead, in our view the benefits are likely to decline significantly (and certainly at a rate greater than the 'risk-free' rate used in Microsoft's NPV calculation) over time, reducing our confidence that they can be expected to be realised.

MS has tried to buy at least one mobile games publisher (page 394)

We note Microsoft's submission that Activision has significant strength in mobile gaming, and consider that the presence of Activision's games on any mobile gaming store would enhance its competitiveness. However, we also consider that this could be achieved by less anti-competitive means than the Merger, and Microsoft could acquire 'attractive content and experience with player engagement and acquisition' by buying a different mobile games publisher. This appears to have been Microsoft's strategy – it attempted to buy [REDACTED] in [REDACTED], and said [REDACTED].

A lot more coming this weekend!

Click to shrink...

Thanks as usual, Idas. Going to be a long year, lol. :)

 

[soul creator]

• It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
• It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

In regards to the first bullet point, is this basically saying that "unless COD gets a linux port, and that linux port can also be streamed, we don't think this is a good enough remedy"? On a related note, can you use game pass streaming on a linux/mac web browser? If you can, I'm not sure why it matters whether the backend port runs on linux or windows? It's not like ABK is porting their games to linux/mac now (except with a couple blizzard exceptions on mac), so I'm not sure what the CMA is "protecting" in this scenario by calling this out. The entire point of cloud streaming is that as an end user, you don't care how the actual game runs, you just buy it and it runs on any device with a basic web browser and a controller.

And for the second bullet point, why is the "dynamism and creativity of competition" automatically considered preferable to just guaranteeing a certain standard up front via a legally enforced remedy? Isn't it equally as likely (hell, possibly even more likely) that ABK can just say "give us billions of dollars if you want COD or any of our games on your bum ass streaming service", and that would also keep market participants from meaningfully able to get those games? That seems more accurate to how the "market" actually works when it comes to getting major 3rd party content on a service, lol.

It's actually sort of fascinating to see praise the CMA for "finally doing their job protecting regular people!" when they're willingly ignoring a chance to implement a government mandated legal minimum standard in favor of some vague invisible hand of the market, haha. It's why looking at this from the standpoint of "they blocked an acquisition, this is inherently anticapitalist and good!" seems strange, because by their own words, they're fetishizing the free market just as much as any other standard right-winger.

 

[Agent Icebeezy]

I was just skimming through the final report, and there is a lot to unpack here.

A few examples:

The remedies offered to the CMA were different to the the ones offered to the EC (page 351)

Microsoft told us that the revised details of the Microsoft Cloud Remedy set out in its response to the Remedies Working Paper were consistent with the revised remedy proposal which had been put forward to the European Commission, but that Microsoft's proposal to the CMA went beyond the proposed commitments to the European Commission in certain respects in order to address the CMA's specific concerns set out in the Remedies Working Paper.

No one can predict the evolution of the cloud gaming market: the CMA, MS, ABK or third parties 🤔 (page 368)

Cloud gaming is an early-stage and growing dynamic market, and there is considerable uncertainty as to how it will develop and what competing business models will emerge. We believe, for the reasons set out in detail in Chapter 8, that foreclosure of Microsoft's rivals in cloud gaming services may be expected to result in substantial harm to competition in this market. We recognise that we cannot predict with any certainty how exactly the market might evolve absent the Merger (or if the Merger is allowed to proceed on the basis of the Microsoft Cloud Remedy). Neither, in our view, can the Parties or third parties. We consider this represents an inherent specification risk in the Microsoft Cloud Remedy – even if the remedy could be well-specified to cover the current status of the market, it may not be suited to future changes. This means that we cannot have a high degree of confidence that the terms of the remedy would be sufficiently well-specified to address these unpredictable market changes.

COD could make Nintendo (Switch) a closer competitor to Xbox (page 389)

We have concluded in Chapter 7 that Microsoft would not have the incentive to foreclose rival console gaming services in the UK. However, this is not determinative of whether Microsoft has a commercial incentive to develop and publish native CoD titles for Nintendo. This would involve substantial costs that would need to be recouped through additional sales of native versions of CoD on Nintendo. In addition, placing valuable CoD content on Nintendo would in principle increase diversion away from Xbox and towards Nintendo. While this effect may be relatively limited given our findings in Chapter 7 that Nintendo competes less closely with Xbox, making CoD on Nintendo could make it a closer competitor to Xbox, which we consider would not be in Microsoft's interest. The Parties have not provided us with convincing evidence of the expected costs, revenues and profitability that might inform an assessment of Microsoft's commercial incentives in this respect.

Predicting the evolution of COD and customer behaviour in ten years is hard (page 391)

The agreement has a ten-year term. We consider that account must be made for the inherent uncertainty over the scale of the benefits over time. The likelihood of the assumptions remaining constant will decrease over time, and the changing nature of the console market makes it harder to make any predictions about how a particular retail product (for example, CoD [REDACTED]) might evolve, or how customer behaviour might develop. As such, it is not a reasonable assumption that any annual benefit would remain constant over the term of the agreement. Instead, in our view the benefits are likely to decline significantly (and certainly at a rate greater than the 'risk-free' rate used in Microsoft's NPV calculation) over time, reducing our confidence that they can be expected to be realised.

MS has tried to buy at least one mobile games publisher (page 394)

We note Microsoft's submission that Activision has significant strength in mobile gaming, and consider that the presence of Activision's games on any mobile gaming store would enhance its competitiveness. However, we also consider that this could be achieved by less anti-competitive means than the Merger, and Microsoft could acquire 'attractive content and experience with player engagement and acquisition' by buying a different mobile games publisher. This appears to have been Microsoft's strategy – it attempted to buy [REDACTED] in [REDACTED], and said [REDACTED].

A lot more coming this weekend!

Click to shrink...

You got a whole lot further than I did but holy hell, I don't need to read anymore based on this. This conclusion is a train wreck, full stop. I don't blame Brad Smith for punching a hole in a wall, lol.

 

[Brutalitops]

I hope this doesn't come across any negative way but as someone who is definitely chasing discourse, this is the best and probably funniest outcome.

We are going to OT5 minimum

 

[Felpsmbs]

The truth is the CMA was looking for a reason to block from the get go. Weather it was Cod or Cloud, I dont think it matters to then. They just want a block. They ditched the console argument because it was full of holes and an appeal would be easier for microsoft. Im not saying the CMA didnt do their research, they obviously did. The problem is they had a final decision before even looking at the data. They adjusted some of the data they gathered to fit their narrative instead of using it to build a conclusion.

At this point I just want this to be over, but allowing an easy block would put microsoft in a weird spot regading future purchases

I also dont know how the CMA appeal process works, but it would be weird if this doesnt have some sort of judicial review after a CAT response. Blocking a 70bn purchase while claiming Microsoft has some sort of monopoly in a sub market that represents less than 2% of the overall gaming market is really shady in my opnion.

Also, how are you blocking a deal when you can't even predict what that market is going to look like in 10 years?

 

[ThereAreFourNaan]

I dont get how one country can block a sale like this when all other countries approve it? I would get it if the majority countries voted no.

Click to shrink...

Since Microsoft wants to operate in the country, they must abide by the country's laws to do so. If they do not want to be beholden to those laws, they can withdraw from the country, but the cost of doing so is dramatically higher than would be acceptable to anybody involved. Hence, any country for whom the cost of withdrawing is very high has substantial leverage over any deal. This isn't about fairness, that's just the bargaining position each party has.

Now, from an international politics perspective, if one country were to regularly become a problem to businesses from other countries, it's certainly possible that American politicians could pressure British politicians over these kinds of things. I don't mean I think Joe Biden is knocking on the Prime Minister's door and threatening him over Activision Blizzard, but over time, it's not inconcievable that the CMA could face pressure from abroad if this becomes a recurring thing. Much like the above, this isn't about "fairness" and a lot of international negotiations and trade deals are more about how much leverage each party has than they are about absolute moral principles. Certainly America's substantial influence on the norms of international commerce has been a mixed bag.

 

[Shirkelton]

I dont get how one country can block a sale like this when all other countries approve it? I would get it if the majority countries voted no.

Click to shrink...

Because that country has a right to regulate it's industries and Microsoft operates in those industries.

Requiring CMA approval is also something MS and ABK agreed to.

 

[Killer]

Yes, this is what most of us believe.
Microsoft is on the hook for that $3 Billion dollars one way or another - whether they walk away today or on July 18th.
So they push with the EU and China - and hope to find a path forward in the UK (knowing all roads lead back to the CMA anyway).

Click to shrink...

I don't think the $3b bothers MS that much . If they can't find a path/agreement with CMA it's a dead end. It's wild that the cloud is the reason they are blocking it . I can find at least 5 other legitimate reasons to block it but they went with the weakest one.😅

 

[LilScooby77]

The truth is the CMA was looking for a reason to block from the get go. Weather it was Cod or Cloud, I dont think it matters to then. They just want a block. They ditched the console argument because it was full of holes and an appeal would be easier for microsoft. Im not saying the CMA didnt do their research, they obviously did. The problem is they had a final decision before even looking at the data. They adjusted some of the data they gathered to fit their narrative instead of using it to build a conclusion.

At this point I just want this to be over, but allowing an easy block would put microsoft in a weird spot regading future purchases

I also dont know how the CMA appeal process works, but it would be weird if this doesnt have some sort of judicial review after a CAT response. Blocking a 70bn purchase while claiming Microsoft has some sort of monopoly in a sub market that represents less than 2% of the overall gaming market is really shady in my opnion.

Also, how are you blocking a deal when you can't even predict what that market is going to look like in 10 years?

Click to shrink...

Preach.

 

[Flavius]

THAT is what I was looking for earlier in someone's post. Thanks Flavius So can anyone explain this part more? Give a real world example/scenario?

Click to shrink...

Any time! And it's a really good question. From my completely amateur perspective, it seems like Microsoft may have shared some or all of the terms of the actual agreements executed and they are speaking to certain provisions broadly while also not unnecessarily exposing those companies and how they operate. But I'll leave the actual answering to those far more informed than I.

 

[entremet]

Regardless if you're pro or against the reasoning makes no sense to me.

 

[Flavius]

Regardless if you're pro or against the reasoning makes no sense to me.

Click to shrink...

This may be my favorite reply of this thread lol