Microsoft, in tandem with Activision, has made the case that cloud gaming isn’t actually expected to be as big as everyone expects them to be.
Of course, the two companies made these arguments in front of the CMA, in their responses to CMA’s provisional findings. It’s a doubtful statement particularly in Microsoft’s part, but let’s review how they reached that conclusion in the first place.
Activision seems to be more credible in stating this belief. In page three of their document titled ACTIVISION BLIZZARD’S RESPONSE TO THE PROVISIONAL FINDINGS, dated March 2, 2023, they say this:
“Cloud gaming is a transient technology.
The computing power of consumer electronics hardware – in particular mobile phones – is developing so rapidly that it will soon, further constraining the future growth and reach of cloud gaming. All forms of local processing (e.g. smart TVs, laptops, tablets and phones) have increasingly powerful processing capabilities, that are more efficient and available than streaming.”
Activision shares similar sentiments in the rest of their document, arguing the point that Activision really had no interest in entering cloud gaming on their own.
But their point here is that they have no faith that cloud gaming will be the future of video games. In particular, this is because technology is still catching up to make advanced tech more affordable at a rapid pace. If cloud games are still more advanced, consumers will still be happy with the tech on their phones, tablets, and laptops.
Microsoft’s claim, however, makes one wonder if they are being as honest to the CMA as they have successfully projected themselves to be so far.
On their document titled MICROSOFT’S RESPONSE TO THE CMA’S PROVISIONAL FINDINGS, dated March 2, 2023, Microsoft said this on pages 48 to 49:
“Cloud gaming on PC – which is the focus of the CMA’s theory of harm – is de minimis, accounting for an extremely small proportion of the roughly 18 million PC gamers in the UK (i.e., less than [REDACTED]%).
The Merriam Webster dictionary defines de minimis as “lacking significance or importance : so minor as to merit disregard.” The Cornell Law School’s WEX (the school’s legal dictionary and encyclopedia) defines de minimis as “something that is very trifling or of little importance. Usually refers to something so small, whether in dollar terms, importance, or severity, that the law will not consider it. For example, the di minimis fringe benefit rule in tax law allows the exclusion of tax on di minimis fringe benefits.”
While the use of a legal term as de minimis may be daunting, its meaning seems straightforward here. Microsoft is claiming that cloud gaming’s impact on the industry as a whole is insignificant, so much so that it isn’t worth consideration under legal parameters.
For a company that’s spent millions on getting their cloud gaming initiative off the ground, that’s quite a claim. But that’s not all.
Microsoft says this on page 49:
“Even if cloud gaming grows, Microsoft expects that it will account for only [REDACTED] % of the total consumer spend on gaming by 2025. The nascent state of cloud gaming means that the CMA’s theory of harm is inherently highly speculative and the Provisional Findings paint an exaggerated and overly optimistic view of the prospects for the segment.”
Obviously, the big question raised here is why is Microsoft in the cloud gaming business now if it isn’t that successful, and they don’t expect it to be that much bigger? Maybe Microsoft has found a way to make it profitable, but it still boggles the mind if they’re really sticking to a business that isn’t that big.
I suppose the same argument can be made about all the companies investing in VR, hoping they’re all in early on a technology that will be much bigger and more profitable in a future they’re not sure is coming. If that’s really what Microsoft is thinking, this whole thing may prove to be a foolhardy venture in the end.