Did you think the CMA was in over their head studying the Microsoft – Activision deal? But they have demonstrated that they understand what the situation is well enough.
In the document titled Addendum to Provisional Findings, published on March 24, 2023, the CMA made these observations on pages 11 to 12 (edited for clarity and brevity):
“We remain of the view that console providers, including Microsoft, place significant value in having exclusive content to differentiate their platform and attract more users.
Moreover, where Microsoft has seen value in making multiplatform third-party studio games exclusive to Xbox, it has done so (eg, the upcoming release in the Redfall franchise following the Bethesda acquisition).
We consider, however, that the financial and strategic calculation of creating new exclusive games for Xbox may be different from that of making CoD exclusive to Xbox:
making an existing multiplatform gaming franchise exclusive leads to quantifiable losses (ie, lost revenues from customers on other platforms), which have to be weighed against uncertain gains (ie, increased revenues from new Xbox customers).
Moreover, in this case, at least part of CoD’s value comes from the size of its community of gamers, and that would be eroded by removing it from PlayStation.
By contrast, making new gaming IP available on other platforms has some costs associated with it (eg, optimizing for a different OS and possible diversion of users to a rival console) and leads to uncertain gains.”
So if you thought that Microsoft making Redfall exclusive was somehow the company cheating or fooling regulators like the CMA, think again.
They understand very well that Call of Duty and Redfall are completely different. The way they see these business decisions is not necessarily to make sure all consumers get what they want. Their primary concern is that the competition coming from these business decisions is healthy for the industry overall, because they are looking at the game industry’s employees. Many of these employees, of course, work from UK, or for other regulators, America, EU countries, etc.
As the CMA has put it, Call of Duty’s unique qualities in the industry are in that most of its player base is now on PlayStation. In general, multiplatform games are most profitable when they maintain that multiplatform status.
On the other hand, if a company like Microsoft makes a new IP from scratch, like Redfall, in the same way Nintendo has with Splatoon, or Sony has with The Order: 1886, are high risk, high reward ventures in themselves. As we know, Splatoon proved to be a huge success for Nintendo, and The Order: 1886 was an expensive gamble for Sony that did not pay off. Subsequently, Nintendo’s gamble on Devil’s Third did not pay off, while Sony’s bet with Elden Ring paid off.
Redfall is the same kind of high risk, high reward betting that Microsoft is taking. If it pays off, it will become a system seller for Xbox Series X, in the same way that gamers buy PlayStation 5 consoles to play games like Elden Ring, and Nintendo Switch consoles to play games like Splatoon.
If not, it can become an embarrassment for the company for that generation, but that’s OK. Platform holders like Sony, Microsoft, and Nintendo regularly take those risks because it’s how they find their big hits, the games that we love above others.
