Microsoft’s Activision acquisition should be allowed to pass

ANKARA, TURKIYE - JANUARY 18: In this photo illustration, the logos of Microsoft and Activision Blizzard are displayed in Ankara, Turkiye on January 18, 2022. (Photo by Hakan Nural/Anadolu Agency via Getty Images)
ANKARA, TURKIYE - JANUARY 18: In this photo illustration, the logos of Microsoft and Activision Blizzard are displayed in Ankara, Turkiye on January 18, 2022. (Photo by Hakan Nural/Anadolu Agency via Getty Images) /
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Before anyone attacks me as a Microsoft fanboy or a corporate shill, allow me to talk about my relationship with Microsoft. I had an Xbox before I  bought a PlayStation, and I’m an avid user of nearly every single Office product ever released. I also was very lucky to meet Bill Gates in 2016, adding to being starstruck by the company.

But it was this conversation with Mr. Gates in 2016 that caught my attention in the current controversy surrounding Microsoft’s attempted acquisition of Activision/Blizzard.

Mr. Gates answered a question that I had, which was mainly about the smartphone market. I had asked him why Microsoft missed out on what has made Apple (at the time) one of the most valuable companies in the world, and how he felt about it. He stated that at the time Microsoft was looking into that market, they faced a slew of accusations from the FTC and Congress around their business practices and a monopoly in the software market. They were, for lack of a better word, distracted.

That was when Microsoft was the top dog, and since then, Microsoft has attempted to get out of the shadow of that status. While Microsoft may still dominate the personal computer software market, it still lags behind its competitors in other industries. Amazon has a stranglehold on the cloud market, and Sony has gaming by the cajones.

Microsoft lags behind not only Sony but Nintendo in console sales. It admitted as much in its depositions to FTC regulators and other regulators around the globe. Microsoft has been accused of attempting to steal away content from its competitors to bolster content for its platforms. I agree the tactic may appear to be sinister at best and anti-competitive at worst. But it’s Sony’s behavior that pushes me more to believe that this deal should go through.

Sony has thrown a toddler fit over a single game

The idea that a single game could threaten Sony’s position as the market leader in video games is preposterous. Especially as Microsoft has made every attempt to prove that this won’t be the case moving forward. The company has struck a deal with Nintendo which would provide the platform with Call of Duty games for the next ten years. It is the same deal offered to Sony, which was rejected.

Microsoft has proven time and again that it is struggling with understanding the video game market. Their one-time smash hit, the Xbox 360, benefitted from a multitude of factors, such as being released a year before the PlayStation 3, as well as being cheaper. Developers preferred the platform due to the simplicity of its architecture which made it less of a hassle to develop for. Microsoft’s hit games, such as Gears of War, Halo, and Fable, were still relatively novel experiences at the time and were enough to sell a console.

Once the Xbox One hit the shelves, it became very clear that Microsoft got lucky in 2006. It failed to produce any games that were enough to sell a console, and despite promise after promise that more interesting IPs were on the way, the company failed to deliver. I’d rather not rehash ReCore.

We are now two years into the current console cycle, and Microsoft is making the same stumbles that it made all those years ago. And now, we’re in a period of market consolidation, where the saturated video game market is beginning to shrink in size to a handful of players. Sony has purchased a handful of video game developers, and Microsoft has gotten a bit frisky and bought out entire publishers such as ZeniMax Studios, the owner of Bethesda Softworks. Regulators were prepared to let the ZeniMax purchase through, but the size of the Activision/Blizzard acquisition has appeared questionable, mainly in part due to the cross-platform nature of the titles it releases, such as Diablo, World of Warcraft, and Call of Duty. Microsoft intends to add these games to Game Pass to increase the value of the subscription, but Sony believes that the intent is to steal Call of Duty away entirely.

"The idea that one game could affect the market leader is preposterous."

At the end of the acquisition, Sony will still be first, and Microsoft will still be third in terms of console sales. Where Microsoft will shoot up in the rankings is its gaming revenue, which currently sits outside the top three. It would become the second-largest gaming company by revenue behind China’s Tencent.