Microsoft’s planned acquisition of Activision-Blizzard has been met with opposition from the Competition and Markets Authority (CMA). The deal was referred to a second phase of review after failing to pass the first.
After examining a range of evidence, the CMA believes that the Merger meets the threshold for reference to an in-depth phase 2 investigation, giving rise to a realistic prospect of a substantial lessening of competition (SLC) in gaming consoles, multi-game subscription services, and cloud gaming services”
Since Microsoft may withhold Activision-Blizzard titles from PlayStation and other multi-game subscription providers, the CMA is concerned that the agreement may hurt those companies.
According to the CMA, a console with a large player base draws additional developers, who in turn draw even more users. Also, the company is worried that the acquisition of Call of Duty and any subsequent Xbox exclusives will result in a significant network effect favoring Microsoft’s ecosystem.
For Microsoft, these concerns are “misplaced” for a number of reasons. Then company states that Sony’s PlayStation is currently the market leader with 150 million consoles sold worldwide, while Microsoft’s Xbox only has 63.7 million. It also claims that Sony’s present market dominance has enabled it to make decisions like increasing the price of its console “without the fear of losing market share.” Earlier this month, it was reported that Sony would be raising the price of the PlayStation 5 to account for inflation in its manufacturing process.
Despite not providing any numbers to back up this claim, Microsoft has speculated that “the PlayStation user base would remain much larger than Xbox” if all Call of Duty players on Sony’s console switched to Xbox. Microsoft also praised the variety and quality of options available on Sony’s platform. Sony claims that in 2021, the PlayStation had over 280 first- and third-party exclusive games, which was roughly five times as many as Xbox, despite some of Sony’s own recent acquisitions.
The CMA is expected to release its second phase investigation’s preliminary findings in January, with the full report coming out by March 1.