Trustbusters should let Microsoft buy Activision Blizzard

trustbusters There are two main concerns. Activision Blizzard has the first jewel in its portfolio: “Call of Duty,” a military-themed first-person shooter game whose latest version sold more than $1 billion worth of copies in just ten days. It is available on both Microsoft’s Xbox game console and Sony’s competing PlayStation. Regulators fear Microsoft could make “Call of Duty” exclusive to Xbox, reducing competition between the ecosystems.

Microsoft says it doesn’t want to freeze PlayStation. It aims to add titles to Game Pass, its monthly subscription service that, in effect, rents a bundle of games rather than selling them individually. Therein lies the second concern of the regulators. For the time being, Game Pass is primarily an Xbox service, but it could one day have a wider reach as games are streamed from cloud-computing services to people’s TVs, web browsers and phones. Microsoft’s cloud-computing business, Azure, could give it a technological edge, while game pass-activation offers best-in-class content expanded to include Blizzard’s portfolio. TrustBusters worries that Microsoft could gain an insurmountable lead in the nascent market.

Neither concern is reason to block the merger. Take “Call of Duty”. Microsoft is starting in third place in the console market — in which it sells the Xbox at a loss — and Activision Blizzard makes hundreds of millions of dollars a year from selling “Call of Duty” to more PlayStations. the user. Recent history suggests that Microsoft should be hesitant to give up those revenues. In 2018, AT&T, a telecom company, bought media giant Time Warner. It then pulled stellar exclusive content such as the sitcom “Friends” from rival broadcasters’ streaming platforms in an effort to promote its own service. This helped avoid falling profits and ignoring mergers. While Microsoft would have good reasons not to make “Call of Duty” exclusive, regulators could in any case insist that it honor a promise to sell the game to PlayStation users on fair terms.

Television also provides a lesson about game streaming. Hollywood was rife with fear in 2016 that Netflix would become a monopoly. Some argued that it had so much power that fed-up creative types were afraid to criticize it. It didn’t work. Today its growth is stalled as it faces competition from Amazon and Disney. It’s harder to make and stream a game than a sitcom. But plenty of companies have been able to challenge Microsoft, including gaming rivals like Nintendo and technology giants like Nvidia and Apple. Microsoft Studios will no longer own blockbuster games from “Fortnite” to “FIFA” by Epic Games and Electronic Arts, respectively. By one estimate, a merged Microsoft-Activision Blizzard would account for only 14% of global gaming revenue among the largest listed gaming companies.

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TrustBusters is concerned about technology mergers, having failed to prevent Facebook from buying Instagram and WhatsApp in the early 2010s, which has made social media less competitive than it should have been. But Microsoft is experimenting with an unproven business model by not choosing a competitor. Game Pass accounts for about 15% of Microsoft’s revenue from Xbox games and streaming accounts for less than 1% of game spending today. The fact that a market is just getting off the ground is a reason for regulators to be vigilant, not for them to intervene. Blocking Microsoft from buying Activision Blizzard is as likely to harm consumers by preventing a new product from taking shape as it is to protect them from a large company with immense market power.

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