Microsoft makes the case that Call of Duty does not have significant market power to UK regulators, in their argument to get approval for their acquisition of Activision Blizzard.
Earlier last month, UK’s Competition and Markets Authority, CMA for short, initiated investigations to this acquisition, because the regulator had concerns that allowing it to go through would harm competition in the industry.
Microsoft and Sony rapidly made maneuvers around this investigation, talking to each other about making a new deal for Call of Duty to be published on PlayStation consoles, and also in their communications to the CMA about getting the acquisition approved or denied.
Sony made their case in their own argument to the CMA that Call of Duty is “too entrenched for any rival, no matter how well-equipped, to catch up.” Simply put, the Call of Duty franchise in particular cannot be owned by either Sony or Microsoft, because it would put either company in an uneven position over the other.
Now, when Sony made this argument, they did seem to be double dealing both Microsoft and the CMA. Microsoft revealed that they actually offered a deal for Call of Duty to be on PlayStation for the next ten years. Microsoft’s statement makes clear that they were willing to make a deal to make the issue moot.
If you think about this from Sony’s point of view, they have the advantage at the bargaining table at the moment. They can afford to hold off on signing any deal that Microsoft offers them, even if they offer the game for 20 or 30 years, as long as there remains a threat that the acquisition will not go through.
If Sony does have a point about how important and powerful the Call of Duty franchise is, making these statements serves their interests as well.
Now, Microsoft’s counterargument to Call of Duty’s supposed dominance focuses on the big picture. Activision only has 10 to 20 % of the market for console games, and their share of monthly active users for consoles is just as low. They also do not publish a significant number of AAA games in proportion to the market in general.
Microsoft’s ultimate argument is no single publisher or game is so dominant that it can harm the industry at large. It’s a bold claim, but given that Sony and Microsoft can make giant franchises from the ground up, such as God of War and Halo, would seem to support that statement.
There’s definitely a lot of money in the industry, but it isn’t overwhelmingly being made by a single company or game. In the bigger picture, even if Call of Duty disappeared tomorrow for whatever reason, there would still be millions of dollars being made in video games. One could argue that if Battlefield or other competitors don’t occupy the room Call of Duty once held, the industry would fill it out in time anyway.
Here is Microsoft’s full statement to the UK CMA:
“Activision content is popular and loved by millions of gamers worldwide. That said, neither Activision nor Call of Duty have significant market power or the status of an “important input”. All of the CMA’s theories of harm in this case are premised on one overarching concern: that Activision’s game catalogue – in particular the Call of Duty franchise – is so important that it will enable Xbox to foreclose its competitors in gaming. But that is false by any objective measure.
• Activision’s share in console game publishing is very low, at ca. [10-20]%.
• Activision’s share based on monthly active users (“MAUs”) for console games is similarly only ca. [10-20]%.
• Activision published only two of the top 20 console titles in the UK in 2021 and its share of so-called ‘AAA’ console games is equally low.
• Even focussing narrowly on the ‘shooter’ genre, Activision would not have the necessary market power to foreclose the downstream market, as the genre accounts for less than a quarter of console publishing revenues.
• Given the incredible array of popular and diverse gaming content that is available to market participants, no title or publisher has ever had sufficient market power in the 30-plus years of console gaming to lead to competitive foreclosure.”
Source: Insider Gaming
