In its quest to acquire Activision Blizzard for more than $68 billion, Microsoft Corp. is working to convince a global gaming community that the historic merger will come with more benefits than drawbacks. The Xbox manufacturer is now part of an international investigation that will determine if the convergence of the two iconic developers would result in less competition in the cloud, console and gaming storefront markets.
The worry is, given the notable reputation, experience and history of Activision Blizzard and Microsoft — independent from the upcoming merger — the convergence of the respective software and technology conglomerates would create an unfair advantage in the market that would become unattainable to competitors.
However, for Satya Nadella, Chief Executive Officer of Microsoft, the merger, announced in January, has been the goal. On Thursday, Sept. 22, Nadella spoke specifically about the deal in an interview with Bloomberg, in which he said Microsoft was optimistic in completing.
“For us, in gaming, we have one goal, which is to bring more games to more gamers on all platforms and provide more choice for publishers everywhere and developers everywhere. And so everything that we’re doing with our content with our cloud and the community, it’s really about driving that choice and that opportunity. And so we feel very confident,” Nadella said.
In terms of the investigation surrounding the $68 billion purchase, the United Kingdom-based Competition and Markets Authority announced it would begin a Phase 2 investigation into the merger on September 15. The Competition and Markets Authority is a department of the U.K. government, aimed at strengthening business competition and preventing and reducing anti-competitive activities.
In an eight-page background report on its Phase 1 investigation into the merger, the CMA reported that given the increasing popularity of gaming, the merger could pose a threat to markets.
“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,” the report read.
The report titled “Anticipated acquisition by Microsoft Corporation of Activision Blizzard, Inc.” also noted the differences in popularity — and revenue — between video games and alternative activities like literature, music or film.
The report also noted that the competition between manufacturers of video game consoles has not changed in the course of two decades.
“For the past twenty years, the same three companies have been the only significant suppliers of console gaming – Microsoft (Xbox), Sony (PlayStation) and Nintendo (Switch being the current generation console), with little or no entry from new rivals. As part of its investigation, the CMA sought to ensure that the merger would not substantially reduce either current or future potential competition.”
For now, Nadella says his only competition is Sony, the creator of the PlayStation gaming console. In terms of revenue, Sony reported gaming revenue of $24.9 billion in 2021. That same year Microsoft reported total gaming revenue of $16.28 billion.
Until Microsoft can surpass Sony’s dominance in the market, Nadella’s views on a successful merger with Activision Blizzard in June remain optimistic.
And in the true spirit of gaming, Nadella says he wants all the competition he can get.
“Of course, any acquisition of this size will go through scrutiny, but we feel very confident that will come out. We are number four or number five, depending on how you count, in gaming. In fact, the number one player in this case, Sony, I think, even in this period has acquired three companies. So if this is about competition, let us have competition.”
This is a developing story.
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