Gaming is a huge industy, but doesn’t have political support is the way I would see this?
Having said that, it’s not like this is going to make a huge difference to MS’s bottom line either way. It’s just frustrating given the nature of the gaming industry and the other big players who have been buying things up that this is the case the FTC jump in on.
Are you seriously going to pretend you don’t see the distinction between Bungie and Activision?
From the Politico article:
“The move comes after the EU launched an in-depth investigation into the deal in November, finding that Microsoft may in the future be incentivized to block access to Activision’s popular “Call of Duty” franchise.”
So, are they planning to block everyone from doing exclusives, just Microsoft, or is Call of Duty a special snowflake?
Well, they may not even block MS. But the reasoning given when they opened the investigation was:
Presumably the same logic, at least as regards this concern, would apply to Sony buying ABK. Game streaming/subscription might be MS-specific (it is in the CMA’s stage one analysis).
Of course I do, but if I look at the overall size of the resulting organizations in this market, then
Sony+Bungie >Microsoft+Activision
If the acquisition is being prevented on the basis that the resulting corporation would have too much market control, then the Sony acquisition shouldn’t be allowed either. It’s a smaller acquisition, but their starting point is much larger.
Is Destiny a huge money maker, or was that just a poke MS in the eye by scooping up the people that made Halo?
It’s a good thing that that’s not the basis, then!
Instead it’s that:
Your analogue is already failing at the first point. Bungie is tiny. They’ve released two games in the last decade. Their estimated revenue when bought was $200M / year. Destiny is so irrelevant commercially that Activision just gave the publishing rights away to Bungie when asked. It’s just not that important for a console to have Destiny on it. Having CoD, FIFA and GTA is.
Let’s consider the big independent AAA game publishers left:
That’s a short list. Microsoft already shortened it by one when they bought Zenimax. Either MS or Sony trying to buy anything on that list would probably meet with just as much resistance as this Activision deal. Anything not on that list? It’d probably be much easier sell.
(Am I missing somebody? Capcom might qualify, but is already substantially smaller than anything on that list. Bandai-Namco has a high gaming revenue but I don’t think much of it is from AAA in normal years. CDPR is tiny. Embracer is huge but my impression is that there’s very little AAA there, it’s just an amazing volume of AA shovelware some of which turns out to be surprise hits.)
But you already have evidence that Microsoft offered a deal to Sony for a decade of guaranteed deployment to the PlayStation.
Honestly, this idea that call of duty is somehow a unique commodity that justifies it’s own direct antitrust intervention is based on what? Is there some other analogue to that idea that we can see in legal history?
I mean, it’s one game.
But beyond that…
Ok, so you are arguing that the end result of the merger, in terms of overall corporate control of the market doesn’t matter, but rather that buying Activision is bad because they are large (rather than small like Bungie), let’s explore that some.
What if you broke Activision down first, and sold individual development groups within it to Microsoft, would that be ok? The end result of course would be the same, but individual acquisitions would all be small, like Sony’s acquisition of Bungie.
I was under the impression that the point of antitrust law was to prevent consolidation of corporate power in a market in order to prevent one company from having enough control over that market to manipulate it.
But given that Sony already had a dominant position in the market, and even the acquisition of Activision wouldn’t give Microsoft more control than Sony, I’m not seeing how you can say that the Activision acquisition is bad, but any Sony acquisition is ok, given that any acquisition by Sony will increase their already dominant position in the market.
If the amount of control that Sony has after acquiring Bungie is ok, I’m not sure how a different company having less control could be deemed unacceptable.
I don’t know what you’re asking, to be honest. I could interpret it as any of the following:
a) You’re suggesting that 3p titles are irrelevant to console adoption.
b) You accept that 3p titles have an impact, but that CoD isn’t particularly special, and there’s lots of substitutes
c) You accept that CoD has an abnormally high impact on the, but do not think any regulator should care about it
Can you clarify?
This question makes me think you don’t quite appreciate the scale differences. Call of Duty alone is like 10x the size of all of Bungie. (It is probably larger than all of Sony’s 1p games combined). A deal containing just CoD will be nothing like the Bungie deal.
Now, if Microsoft wanted to buy e.g. just King? I bet that’d be fine, since it’s a different and more competitive market. If they tried to buy an individual bit of IP and the teams working on it, e.g. Overwatch or Diablo? Seems unlikely from a business perspective that either side would be interested in such a deal, but I can’t imagine that getting a ton of regulatory scrutiny.
Some crazy scheme of the company temporarily splitting into multiple parts so that each part can be sold separately to the same buyer? No, of course that wouldn’t work! You’re falling into the classic engineer’s trap of thinking that the law is a mechanical system, and if you just find the right workaround there’s nothing anybody can do to stop it.
I think that obviously can’t be the sole point of antitrust law, since many (most?) anti-trust cases aren’t about consolidation of power. Nor do I think there’s any kind of defined threshold on what is / isn’t too much power. The case will get decided based on whether this specific merger significantly reduces competition, the only way the size of Sony matters is if Microsoft tries to make some case about not having enough scale in their games business to compete and Activision getting them that scale.
This seems hard to prove, considering both Sony Microsoft and Nintendo all do this already.
None of those companies made a $70 billion purchase of some of the world’s most valuable IP to deny it to their competitors. No, wait, sorry. One of them did. The one getting sued for it.
I am pretty sure that Microsoft said they would keep a certain title cross platform though.
I think that call of duty is just a game. It’s a very popular franchise, but it isn’t a market controlling factor in itself. Even if call of duty were to become exclusive to the Xbox, it wouldnt mean the destruction of Sony and the PlayStation, any more than the fact I can’t play call of duty on the switch had caused the demise of Nintendo. (Although, humourously enough, Nintendo actually did sign a deal with Microsoft to guarantee CoD games on the switch for a decade)
It’s one game. Controlling it’s development does not constitute monopolistic power, any more than the fact that Toyota controlling the manufacturer and sale of Toyota cars does.
The total videogame market on 2022 is something around 220 billion, right? What are the total sales numbers for CoD? I know it hit a billion in 10 days, but that’s pretty much everyone buying it, right? I can’t imagine it’s sales went over 2 billion in 2022, did they? So, despite how big a game it is, were still talking, what, less than 1% of the overall videogame market? I don’t see controlling call of duty as giving you monopolistic control of the market.
No, I do. But the size of a transaction has nothing to do with antitrust, right?
Antitrust laws are based on preventing monopolies, right? That, and preventing price collusion, but that’s essentially just emerging a monopoly without actually doing the acquisition first. This is my understanding of the purpose of those laws, but I may be mistaken.
Aren’t most antitrust cases about consultation of power? I honestly thought that preventing monopolies was the fundamental purpose of antitrust law.
Like the first sentence of wikipedia’s page on it states:
In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies.
Specifically, the relevant parts are this:
Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.[2]
We can imagine a situation where an acquisition by Microsoft would result in such a case, giving them so much power in the videogame market that they would be able to enact monopolistic power and harm consumers. For instance, of they actually bought Sony, and thus there was only really one choice of console.
That kind of action would be anti competitive, resulting in a market where there was less completion for consumer dollars.
There doesn’t seem to be anything about this acquisition which prevents competition, or creates a monopoly.
Certainly even after this acquisition, Microsoft will not be the dominant force in that market. Sony will still control a larger portion of the market than Microsoft.
For the antitrust rules to apply, that suggests that Microsoft will control so much of the market after this acquisition that they will be able to enact monopolistic practices. But if that were the case (I think we all agreed it’s not, but if it were), then surely Sony already had more than that much monopolistic control of the market, and any growth of Sony’s market control would be harmful.
But it’s not. To have that kind of control over the videogame market would require more control than Sony currently has, and this more than Microsoft would possess even after this acquisition of Activision.
Just to reiterate a point that I think keeps getting lost: the FTC aren’t looking at the ‘video game market’ as a whole for evidence of monopolistic activity. Their complaint specifies three relevant markets they are concerned about:
All of them are affected by console exclusives, hence a focus on games like CoD.
That’s an important clarification, thanks. Does that fundamentally change the calculus I presented though? Does CoD constitute some major chunk of those markets?
And on the other side of controlling interest in those more narrowly defined markets, Sony will still be the largest player, even after the Activision acquisition, right?
According to the FTC it does, although personally I couldn’t say either way. In the complaint, they put forward evidence that the generous revenue share for Activision’s AAA output shows how valuable it is for the platform holders to drive engagement and adoption. Much of it is redacted, but it looks like they have quotes from Microsoft execs to also support the argument.
I don’t think so. For every case of a merger being blocked due to concerns from competition authorities, there’ll be dozens of cases of cartels, illegal bundling, using a dominant market position in one market to gain an advantage in another, etc.
You wrote “create a monopoly” like half a dozen times in that post. That’s not the relevant standard. Nor is the bar set at preventing competition, but at merely substantially reducing it. What’s substantial? The law doesn’t define it. It’s totally subjective and up to the regulators to decide when making a decision to sue, and for the judge to decide when making a verdict.
The chain of logic from why this acquisition will reduce competition is simple though. That’s why I asked the multiple-choice question that you didn’t answer. (I know you meant well in writing a long reply instead, but it just ended up obfuscating your position, and I still don’t understand where the core of the
misunderstanding is.)
The logic would be:
I think 1 and 2 are obvious common sense. 3 is easy to prove. 4 and 5 follow logically.
So why isn’t it anti-competitive for Sony or Microsoft to publish exclusives? Because the standard for a merger are different than the standards for normal operation of a company. It’s not anti-competive to just make a better product. (E.g. Facebook buying WhatsApp got a lot more antitrust scrutiny than Facebook launching their own messenger product). That’s not to say that a company couldn’t be so dominant in one market that they’re forced to cater to the competition, but the bar for that is a lot higher than Sony and consoles. (E.g. EU forcing Microsoft to add a browser selection dialog as a post-install step to Windows, and search engine selection to Android.)
Why isn’t it anti-competitive for Sony to buy Bungie (or hypothetically, e.g. for Microsoft to buy CDPR)? Because those companies have very few games, and those games aren’t important enough to drive purchasing decisions, and thus wouldn’t meet the bar for the reduction in competition being substantial enough. What’s the threshold for important enough? I suggested a list in the previous message.
Not the relevant market. Again, CoD alone is almost certainly bigger than all of Sony’s 1p games combined. Sure, Sony has a lot of revenue in gaming as a sector. But most of it is hardware, licensing fees, and subscriptions.
Now, Sony does have a larger console platform than Microsoft has. And there are areas where that larger platform could be used in an anti-competitive manner.
The ban on cross-platform multiplayer is an obvious case; preventing cross-platform play led to people having to buy the console that most of their friends had, which gave Playstation an unfair advantage since they had the largest initial user-base. No matter what improvements MS made after their initial disaster, that was a steep hill to climb. And this was a totally artificial restriction, with no real benefit to the users, saving Sony any resources. If Sony hadn’t lifted the ban, I think they would have ended up in an antitrust case and lost. (And that despite Sony not having a monopoly, because having or gaining a monopoly is not a requirement for something being anti-competitive!)
Ok, so here you are suggesting that the culmination of your 5 points ends up with this, being anticompetitive:
But this isn’t actually anticompetitive, right? As you say below:
The act of securing exclusive access to games is not anticompetitive at all… It’s the act of competing. That is the competition.
There seems to be a suggestion by many that any act that hurts your competition is anticompetitive, but that’s not true. Anticompetitive acts are those that prevent your competition from competing with you, like securing all of some necessary resource so no one else can enter a market, or acts which circumvent competition through collusion with other market players in order to agree not to compete with each other and fix prices.
So how would controlling CoD development be anticompetitive? Are we to believe that a console manufacturer could not exist without CoD? I don’t think that’s actually true, do you? Is it the case that Sony could not exist in the game market without access to all of Activision’s games? Again, I don’t think so.
And if it’s not true, then how is controlling Activision anticompetitive?
To be clear, I was using the term “monopolistic”, taking about when a corporation controls enough of a particular market that they can manipulate it. The vase of Sony that you’re describing there is that, right? Their advantage in marketshare allowed them to limit the entry of others into it. I think this would fall under the umbrella of monopolistic behavior, even though it is not technically a complete monopoly.
You keep using this kind of very absolute language. “Destruction of Sony and the Playstation”, “a console manufacturer could not exist”, “Sony could not exist”, “monopoly power”. That is a really high bar, and it is not the standard by which this merger gets judged.
The merger gets judged on whether it significantly reduces competition in the (non-portable) console market, not on whether it will cause Sony’s corporate headquarters to be burned and the grounds salted. And yes, it seems pretty obvious to me that a Xbox-only CoD would make it much harder for Playstation to sell consoles, i.e. to compete in the console market.
On the other hand, a company making their product better does not get judged on whether it reduces competition. That’s because the laws applying to mergers don’t apply companies’ internal operations.
This is a nuance I wasn’t aware of, and seems to be a hangup for many in this thread. Thanks for the explanation.