In Microsoft’s latest response to the UK CMA regarding their acquisition of Activision Blizzard, the owner of major cloud gaming service Game Pass surprisingly referred to cloud gaming as “immature and unproven”.
In this context, Microsoft is making the argument that cloud gaming services, not just Game Pass, are not yet popular enough, and not expected to become popular enough, to make Microsoft too powerful a company to acquire Activision Blizzard.
We won’t post the whole argument here, but you can read a significant amount of that argument as provided in the CMA report below:
“Cloud gaming allows gamers to stream games from a remote server to any device (e.g., mobile, PC, console, smart TV) over the internet. This is a new and immature technology which the CMA has recognized faces significant challenges, particularly on mobile devices, as “users may be unaware of the choices available to them or find it difficult to access a provider’s services since web apps are not currently discoverable on, or distributed by, the App Store, which is how users are accustomed to discovering apps”.
While this may grow, particularly on mobile devices, adoption is not expected to be rapid as it requires a significant change in consumer behaviour. Research published by the CMA show that, both worldwide and in the UK, where cloud gaming app users had a choice between a provider’s native or web app on Android, around 99% of users used the native app, with 1% using either the web app or a combination of the web and native app. Microsoft and many industry experts expect that gamers on PC and console will continue to download the vast majority of the games they play.”
While it’s easy to dismiss this as just another statement that serves Microsoft’s interests in this case, it’s worth taking a few minutes to understand the ramifications of this statement. Microsoft made a strong shift from being a software company to a cloud services company when Steve Ballmer stepped down as CEO, to be replaced by the still-current CEO Satya Nadella. Today cloud services are the significant leading segment of their business, weathering the past eight years, including the pandemic. As of July 26, 2022, Microsoft cloud revenue was at $ 25 billion, an increase of 28 % year on year.
Cloud gaming as a segment of Xbox Game Pass is a part of this, but it doesn’t define the subscription service. Game Pass on PC and Xbox mainly allows gamers to fully download the games that are part of the Game Pass library, with game streaming offered as an alternate way to access those same games in a pinch. Cloud gaming isn’t available as its own cheaper Game Pass plan, but only as part of Xbox Game Pass Ultimate, the most expensive plan with all the other incentives.
If Microsoft Cloud was the brainchild of Nadella, Game Pass is successful today thanks to the efforts of Team Xbox head Phil Spencer. That business has continued growing, extending to new regions, coming to Meta Quest, and with plans for even Microsoft’s own dedicated cloud gaming device.
To sum up, there is no greater advocate and beneficiary of the cloud gaming business than Microsoft. For them to call the business immature is quite sobering, though perhaps not as sobering as what happened to Google Stadia.
Source: Washington Post, gov.co.uk
