Microsoft’s plan to buy video game giant Activision Blizzard for $68.7 billion could have major effects on the video game industry, transforming the Xbox maker into something like Netflix for video games by giving it control of many more titles. popular.
But to get to the next level, Microsoft must first survive a spate of government investigations from New Zealand to Brazil, and from US regulators emboldened by President Joe Biden to strengthen antitrust enforcement.
In the UK, regulators threatened on Thursday to step up their investigation unless both companies submit proposals within five days to ease competition concerns. More than seven months after Microsoft announced the deal, only Saudi Arabia has approved it.
“A growing number of countries are subjecting major global transactions to deeper scrutiny,” said William Kovacic, former chairman of the five-member US Federal Trade Commission. “Many of the jurisdictions that are exercising that scrutiny are significant economies and cannot be ignored.”
Microsoft has faced antitrust scrutiny before, most notably more than two decades ago when a federal judge ordered its dissolution following the company’s anticompetitive actions related to its dominant Windows software. That verdict was overturned on appeal, although the court imposed other, less drastic sanctions on the company.
In recent years, however, Microsoft has largely escaped the more intense regulatory backlash suffered by its Big Tech rivals, including Amazon, Google and Facebook parent company Meta. But the size of the Activision Blizzard merger has drawn worldwide attention.
The cash deal will be the largest in the history of the tech industry. It would give Microsoft, maker of the Xbox gaming system and console, control of popular game franchises such as Call of Duty, World of Warcraft and Candy Crush. There is also a growing sense that the previous review of Big Tech mergers was too lax, like when Facebook bought Instagram in 2012 and WhatsApp in 2014.
“Taken together, that means the kind of compromises that he’s going to have to make are going to get more difficult,” Kovacic said.
The prospect of Microsoft gaining control of Call of Duty has been particularly worrying for Sony, maker of the PlayStation console that competes with Microsoft’s Xbox. In a letter to Brazilian regulators, Sony emphasized Call of Duty as an “essential” game, a blockbuster so popular and entrenched that it would be impossible for a competitor to develop a rival product even if it had the budget to do so.
The UK watchdog’s preliminary investigation raised similar concerns. He said Microsoft’s control of popular Activision Blizzard games raised concerns the deal would hurt rivals in the multi-game subscription services and cloud gaming market.
One solution could be a deal in which Microsoft agrees to ensure that console-making rivals such as Sony or Nintendo are not locked out of popular Activision Blizzard games. Microsoft has already publicly signaled its openness to that concept.
Microsoft president Brad Smith said the company has made a commitment to Sony to make Activision games like Call of Duty “available on PlayStation beyond the existing agreement and into the future,” though many are skeptical about how much. those promises would last if they were not established. regulatory consent decrees.
On the other hand, Microsoft also has a much better reputation in Washington than it did in 2000. It is “considered more reasonable and sensible” on issues such as data privacy, Kovacic said.
Microsoft has also been working to win over skeptics in the US, starting with a union that has been trying to organize Activision Blizzard employees. Democratic lawmakers have also raised concerns about allegations of Activision’s toxic workplace culture for women, which led to employee walkouts last year, as well as discrimination lawsuits filed by California and federal civil rights advocates.
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In March, the Communications Workers of America had called for tighter oversight of the deal by the US Department of Justice, the FTC and state attorneys general. But a June 30 letter from the union to the FTC said it had moved to support the deal after Microsoft agreed to “ensure Activision Blizzard workers have a clear path to collective bargaining.”
Games represent a growing portion of Microsoft’s business, despite the company’s efforts to portray itself and Activision Blizzard as “small players in a highly fragmented publishing space,” according to a filing with the US Trade Commission. New Zealand.
In 2021, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, which is behind the popular video games The Elder Scrolls, Doom, and Fallout. Microsoft’s holdings also include the hit game Minecraft after it bought Swedish game studio Mojang for $2.5 billion in 2014.
The Redmond, Washington tech giant has said the game acquisitions will help bolster its Xbox Game Pass gaming subscription service and mobile offerings, particularly from Activision Blizzard’s King division, which makes Candy Crush.
Dutch game developer Rami Ismail said Microsoft’s subscription-based service has so far been a positive for smaller game studios trying to get their content to users. But he isn’t sure of the merger’s long-term impact.
“Xbox Game Pass as a product has been really good at getting funding for interesting and creative games that might not have the normal market reach to be successful,” Ismail said. “On the other hand, as power consolidates, there is less incentive to do something like that.”
Microsoft’s rivals are also consolidating. In July, Sony closed a $3.6 billion deal to buy Bungie Inc., maker of the popular Destiny game franchise and original developer of Xbox-owned Halo. Take-Two Interactive, maker of Grand Theft Auto and Red Dead Redemption, completed a $12.7 billion deal in May to acquire mobile game company Zynga, maker of FarmVille and Words With Friends.