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Microsoft’s Activision Blizzard purchase is a disaster for gaming

Microsoft just dropped a bombshell in announcing its intentions to acquire Activision Blizzard for nearly $70 billion … and I couldn’t be more scared for what this means for the industry at large.

We already saw Microsoft building up to these large-scale purchases through small, independent studios early on, followed by the massive Bethesda purchase that was finalized last year. I had hoped that that would be the last purchase of that scale for Xbox, but I was very, very wrong.

Buying Bethesda (or more accurately, ZeniMax Media) felt like it was crossing a line. Xbox already had around 20 studios under it, and adding in an entire publisher felt like a desperate move to bolster its library with exclusives and valuable IP. It made me very suspicious that Microsoft was trying to essentially buy success for this generation of consoles, but the latest purchase is genuinely frightening for what it means for everyone, not just Xbox.

Watch out Disney

Xbox Game Pass.
Image used with permission by copyright holder

Looking back at the Bethesda buyout, there was already a huge amount of confusion, anger, and worry across the gaming landscape. This was in part due to Microsoft’s less than clear messaging regarding exclusives, plus the fact that some of its new studios were still under contract to release PlayStation exclusives. Even if messaging this time is clear regarding the exclusivity of all the new franchises Microsoft just snatched up, the anger and worry will not be stifled. In fact, it will only be worse this time.

We’ve been moving toward a world where independently operated publishers could become less common. Microsoft, Tencent, and Embracer (to name a few) have been picking up these studios like they’re hoarding the last couple slices of pizza from the box. Sony has made a few purchases as well, but nothing nearly on the scale as this.

The problem with all this consolidation, speaking specifically about Microsoft here, is that it builds walls. Recall when Disney purchased … seemingly every major media franchise. Disney+ quickly became the only place to access them and much of its content began to feel the same as IPs adapted to Disney guidelines. Now the same could be true for Xbox.

The repercussions of this deal are coming — and I don’t think we’re going to like them.

For a company touting that it wants to let people play how and where they want, Microsoft should really add an asterisk that says “unless you’re on PlayStation,” because that’s what this purchase could really mean. Between Activision Blizzard, Bethesda, and its own studios, Xbox has all the biggest western IPs exclusive to its platforms now, with the main exception being EA games.

It’s becoming difficult for Sony to compete. It is more successful by all metrics than Xbox, but it’ll need to break out some blank checks if it wants to mitigate more disaster. The endgame seems dire. Say that Sony responds by buying up major eastern publishers like Capcom, Sega, and Square Enix. That would further divide and stagnate the market.

It’s gross that Xbox can create a potential monopoly by buying studios and games away from its competition. That’s capitalism at its worst.

Competition breeds excellence

Tyiptych of PS4, Xbox, and Nintendo console controllers merged into one.
Image used with permission by copyright holder

Microsoft’s resurgence following the Xbox One’s rough life cycle was born out of competition. Sony dominated Microsoft last generation thanks to killer first party games and that forced Microsoft to adapt. Now, Microsoft doesn’t have to worry about making its own games to compete with Sony because it bought all the biggest IP it could to keep up. Game Pass itself is only such a good deal because it had to be. Expect that service’s price to jump very soon now that it’s not playing defense.

Even within this new mega Xbox, will there be room for another shooter to compete with Call of Duty? Why would Microsoft want to split its own sales? Microsoft would now risk stepping on its own toes if it develops competing shooters. The more studios Microsoft acquires, the more fearful I become that it could limit its own creativity.

Game Pass is only such a good deal because it had to be.

Some of the biggest franchises we see today are a result of one studio competing with another. Mario and Sonic traded blows early on, the Mortal Kombat and Street Fighter franchises continue to spar, and Call of Duty beat out Medal of Honor. This acquisition makes me terrified that risks, innovation, and creativity will be relegated to a much smaller scale that doesn’t interfere with the big, established money makers.

A bad premonition

I’m genuinely nervous that this marks a major turning point in the games industry for the worse. Xbox has presented itself as cool, friendly, and pro-gamer for a while now, but that’s just good marketing. This is a company, not your friend. It will do whatever it can to make the most money possible.

PlayStation is the last real competition it has, but it’s on a time limit. It needs to bolster up its own comparable conglomeration of studios, or take the Nintendo approach and carve out its own niche separate from what Microsoft is doing.

Games have already been feeling less risky and exciting with development taking more time and money than ever before. Bringing more studios under a single roof is only going to exacerbate this stagnation. I pray this is the last acquisition we see Microsoft make, but can’t realistically think it will be. Until it risks an actual monopoly, it’s going to keep pushing. It probably won’t be in the next couple of years, but the repercussions of this deal are coming — and I don’t think we’re going to like them.

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Jesse Lennox
Jesse Lennox loves writing, games, and complaining about not having time to write and play games. He knows the names of more…
Why cloud gaming is the linchpin in Microsoft’s troubled Activision Blizzard acqusition
Key art showing multiple devices playing games via the cloud.

The United Kingdom’s Competition and Markets Authority (CMA) delivered a shocker this week when it blocked Microsoft’s acquisition of Activision Blizzard on Wednesday. While a lot of focus on Microsoft’s fight was centered around whether or not the acquisition would give Xbox consoles an unfair advantage over PlayStation consoles, what ultimately decided it was a much smaller market: cloud gaming.
The idea of being able to stream the game you’re playing from the cloud has existed for well over a decade. Cloud gaming’s relevance to the video game industry has only grown over the past several years thanks to both failed and successful efforts from big tech companies like Google, Amazon, and, most importantly, Microsoft. Still, cloud gaming is considered relatively niche, with Activision Blizzard Bobby Kotick calling it "inconsequential" in an interview with Bloomberg and UCL Associate Profession Joost Rietveld saying it’s not a distinct market in a submission to the CMA.
Despite those pleas, the CMA claims that cloud gaming is a “nascent market” and that “already strong incumbent in this market even stronger” in its 418-page report on the matter. Following the CMA’s decision on Wednesday, I spoke to several different analysts to find more clarity about how big Microsoft is in the cloud gaming space and why the CMA should feel compelled to intervene. While experts mostly side with Microsoft over the CMA on this decision, one greater truth emerged from these discussions. Whether one thinks cloud gaming is relevant to this acquisition or not, this emergent style of gaming has reached a point of no return where it'll be instrumental to the video game industry going forward. 
Microsoft, king of cloud gaming
Cloud gaming may sound like a niche within the industry, but that's not entirely accurate. BrandFinance Managing Director Laurence Newell tells Digital Trends that “cloud-based services account for over 70% of Microsoft’s brand value, amounting to a staggering $137.5 billion.” That’s quite an eye-catching number that understandably would raise a regulator's alarm bells. However, Newell admits that gaming only makes up 8.5% of Microsoft’s revenue, and cloud gaming is an even smaller amount of that slice.
Despite its relatively small impact on the wider company, most of the experts I spoke to agreed that Microsoft has emerged as a cloud gaming leader thanks to its compatibility with a large segment of the Xbox Game Pass Ultimate library. Conversely, Activision Blizzard has had almost no cloud gaming presence outside of one Sekiro: Shadows Die Twice port on Google Stadia before that service’s shutdown. If it were to be acquired, it is inevitable that more Activision Blizzard games would likely come to cloud-based gaming services.

Despite the shutdown of Google Stadia and the relatively small brand value received from cloud gaming compared to the rest of the company, the CMA still points out in the press release about its decision that “monthly active users in the U.K. more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to 11 billion British pounds globally and 1 billion pounds in the U.K. by 2026.” Associate Professor of Strategy and Entrepreneurship at the UCL School of Management Joost Rietveld, who has also been a consultant for Microsoft during its acquisition process, challenges the notion that cloud gaming as a whole is a single market.
Instead, Rietveld splits it into four categories, placing Xbox Game Pass into a category called “cloud gaming as a feature,” which is when it’s “offered as part of a consumer-facing distribution platform” or “included within a bigger bundle of services provided by the platformer.” Under Rietveld’s view, services like Nvidia GeForce Now, Ubitius, and EE -- all of whom Microsoft has made individual deals to bring Activision Blizzard and Xbox Game Studios titles to -- fall into different categories and thus shouldn’t be considered or directly compared to Xbox Game Pass. No matter how they’re categorized now, the real question mark looming over the technology is its future growth, according to Omdia Senior Principal Games Analyst Steve Bailey.
“Will it remain a niche additional service or become the gaming platform of the future?” Bailey asks in his statement to Digital Trends. “Our projection is that cloud gaming is growing rapidly (revenue should more than double by 2026), but it’s still a long way from taking over the games market, so it remains arguable either way.”
“Arguable” stands out as the keyword to me here. Like any emergent technology, we’re heavily debating the positives and negatives of cloud gaming, specifically through the lens of this acquisition. But what exactly is it that the CMA sees in Microsoft that worries them?
The CMA’s problem with Microsoft
“The CMA’s argument is not that acquiring Activision Blizzard would allow Microsoft to dominate the console market as a whole, where Sony and Nintendo have strong positions relative to Xbox, but only that it would help it to achieve a dominant position in cloud gaming specifically,” Bailey tells Digital Trends. “Microsoft and Activision Blizzard will likely argue that this is disproportionate, given the relatively small scale of the cloud gaming market.”

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Microsoft’s Activision Blizzard acquisition blocked in the U.K. over cloud concerns
microsoft activision blizzard deal questions overwatch 2 lucio

The U.K.'s Competition and Markets Authority (CMA) has blocked Microsoft's attempt to acquire Activision Blizzard because of its potential negative impact on cloud gaming. 
Since January 2022, Xbox parent company Microsoft has been trying to acquire Activision Blizzard, the video game publisher behind franchises like Call of Duty, Diablo, Warcraft, and Overwatch. The companies have run into lots of regulatory hurdles, though, especially from the CMA and FTC, the latter of which is currently suing Microsoft. While it seemed like the CMA was inching towards approving the deal, the U.K. regulator ultimately decided to block it due to its potential impact on the fledgling cloud gaming market.

"Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service," a press release from the CMA explains. " Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities."
Over the past couple of months, Microsoft has attempted to ease these cloud gaming concerns by making deals with companies like Nvidia and EE. The CMA did not think these remedies were enough, though, saying that Microsoft's efforts didn't account for enough potential business models, cloud gaming services that don't use Windows, and how the deal could take "the dynamism and creativity of competition" away from the U.K.'s cloud gaming market.
Obviously, Activision Blizzard and Microsoft aren't too happy about this decision. Activision Blizzard directly attacks the CMA in a statement provided to Digital Trends, saying that the "report contradicts the ambitions of the U.K. to become an attractive country to build technology businesses," before calling the country's economic prospects "dire" and threatening that it will reconsider its plans for growth in that country. 
Microsoft's statement from Vice Chair and President Brad Smith is a bit more measured, saying that Microsoft is "fully committed to this acquisition and will appeal." Citing the deals the company has already made to bring Call of Duty to more platforms, Smith says that the decision shows "a flawed understanding of this market and the way the relevant cloud technology actually works."
Microsoft has a lot of work cut out for itself if it still wants to force this deal through after pressure from the FTC and CMA. As the appeals process could take up to nine months or more, it seems unlikely that the acquisition meets its original June 2023 deadline; it's probable we'll be following this fight to acquire Activision Blizzard for the rest of the year. 

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Microsoft pledges to bring Xbox PC games to Nvidia GeForce Now

Microsoft has announced a 10-year partnership with Nvidia aimed at bringing Xbox PC games to its cloud gaming service competitor Nvidia GeForce Now as part of its ongoing efforts to win over companies skeptical of its potebtial Activision Blizzard acquisition.
This means that players can use Nvidia GeForce Now to play the Steam, Epic Games Store, or Windows versions of titles like Halo Infinite, Redfall, and eventually, Call of Duty through the cloud on GeForce Now. Third-party publishers with games on the Windows Store can also now grant streaming rights to Nvidia. This announcement came during a European Commission hearing where Microsoft tried to convince regulators that its impending acquisition should bne allowed.
Microsoft has been under a lot of regulatory scrutiny even since it announced its intent to acquire Activision Blizzard in January 2022. It's trying to win over industry peers with deals like this one with Nvidia. This week, the Communications Workers of America voiced its approval of the deal, and Microsoft has signed a binding agreement to bring Call of Duty to Nintendo platforms as well. Previously, Nvidia had raised concerns about Microsoft's Activision Blizzard acquisition, but the press release announcing this agreement states that the deal "resolves Nvidia's concerns," and that Nvidia now gives "full support for regulatory approval of the acquisition." 
Regulatory bodies in the U.S., U.K., and Europe are worried that Microsoft acquiring Activision Blizzard will hurt the game industry and sabotage Microsoft's competitors in both console and cloud gaming. Nvidia GeForce Now is seen as one of the biggest competitors to Xbox Game Pass Ultimate's cloud service offerings, which makes it surprising that it reached an agreement with Nvidia. However, this deal also demonstrates how Microsoft is willing to make concessions so that its acquisition of Activision Blizzard is approved.

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