Microsoft acquired Activision Blizzard King for $69 Billion on 2023-10-13

[iroboto]

According to the narrative from the company that doesn't provide any figures for comparison. And again, the CMA operates only in the UK where PS is nothing like 80% of the console market even factoring in last gen. Nor even most recent sales ratios with PS5 breaking out of a constrained supply. Nor comparing revenues which is 16B:24B, or 2:3. And that's taking the console space in some bizarre isolation from the whole 'home gaming sector' (to exclude mobile) that incudes the MS dominated PC OS and Nintendo handhelds. Compare Sony's revenue and sales as part of the whole of home gaming, it's not 80%. Sony is 40% of the Sony:MS:Nintendo console triumvirate, which is 27% of the whole gaming sector. So Sony is 40% of 27%, about 11% of the entire gaming sector, versus 19% for PC downloads. Figures from here:

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So, yeah, it turns out that '80% market share' bullet point argument really gets my goat.

haha of course, it's a lot of posturing happening for sure. On one hand, the markets are gerrymandered to create a high performance console segment to remove Nintendo so that COD argument doesn't apply to them. And then in doing so, we get into a weird situation where metrics can be exploited to show a 80% market share for Sony. It's all terrible really.

It makes for an interesting discussion because CMA is really holding the keys here for the global market, even though they only really need to concern themselves with just the UK.

For me, it's clear Sony just doesn't give a shit about CoD. They just don't want the merger to go through. If I liken this back to the controversy of F1 between RB and Mercedes. For RB any penalty will be considered too harsh, and for RB's competitors, no penality towards RB will satisfy them. In the end a decision will be made, and all parties will just need to respect it.

We are seeing a similar situation play out here. Sony is not willing to lose any % pts of revenue to MS, regardless of how it is formed, and MS wants to prove that it's incapable of winning even with this change. Both Sony and MS will be working with regulators to get what they want out of this.

I have no doubts Sony will survive this, especially with the 10+ year COD binding agreements. But Sony's CEO's job is to ensure maximum return on profits and long term strategy, and things like this fall directly into his role as CEO for SIE. So this is where he will take it to the extreme to show his shareholders value.

I don't know if this will come back and burn them later however. But it's to watch and enjoy.

 

[BRiT]

Sony is 40% of the Sony:MS:Nintendo console triumvirate,

The CMA considers the market as purely SONY:Microsoft. They do not consider Nintendo to part of the same console market.

 

[Nesh]

The CMA considers the market as purely SONY:Microsoft. They do not consider Nintendo to part of the same console market.

I didnt get that impression. I get the impression CMA sees the whole market and within that market Microsoft and Sony are the direct competitors in the console market.

 

[Inuhanyou]

What Jim Ryan wants to do is quite clear, what matters is the merits to the arguments being made.

I think it's to the greater health of the industry and all players that all these pubs remain neutral for the wider market to partake in.

For my personal part I am already saving for a series s, so I will get games regardless of how this goes, but it does not signal to a healthy industry when pubs start trying to eat one another en masse with maximum consolidation.

Every console pub could be considered a leader of the market in some degree. MS intentionally kneecapped their software sales to push gamepass and that has a knock on effect for their business. Their arguments to the CMA about Sony being so much bigger than them and an unfair bully on a pedestal because they have a more well loved brand in more places and types of games people want to play is silly.

Especially because Sony put in the work to actually make that happen over many decades. They didn't automatically became a global hegemon just by existing in the gaming space. Plenty of other competitors smaller and bigger than sony tried and failed. MS had plenty of different opportunities to gain critical footholds in the industry and failed to take them.

I say all that to say this much : MSs position in the market does not justify an acquisition of an entire publisher, especially on the level of Activision. That's not what competition is.

Competition is Sony being forced to make a gamepass alternative because people saw a particular value in gamepass. It's MS being forced to make Xbox live gold more valuable with their games with gold initiative due to Sony's success with PSplus monthly games. It's pro consumer moves and services that force the competition to level up and offer greater value in return.

A publisher buying war isn't a competition to the top, it's a race to the bottom

 

[Shifty Geezer]

The CMA considers the market as purely SONY:Microsoft. They do not consider Nintendo to part of the same console market.

If you want to use the UK numbers, from the CMA report:

Our assessment

7.45 We used data from the Parties and third parties to estimate market shares for different gaming consoles. We found that, depending on how these shares are measured (ie, by total gaming console revenues, installed base or yearly active users), Microsoft is the second or third largest gaming console provider globally (and second in the UK). As set out below, Microsoft’s share of supply ranges between [20-30%] to [30-40%].

There is no 80:20 split. That's just convoluted statistics wrangling, unobtainable through data-driven thought processes and needing the power of Mathemagical Imaginarians to create a pseudological reason for its existence that can be echoed in the Twittersphere.

 

[BRiT]

That's just convoluted statistics wrangling, unobtainable through data-driven thought processes and needing the power of Mathemagical Imaginarians to create a pseudological reason for its existence that can be echoed in the Twittersphere.

The numbers were already cooked the moment CMA created their own market definition.

 

[see colon]

I say all that to say this much : MSs position in the market does not justify an acquisition of an entire publisher, especially on the level of Activision. That's not what competition is.

This ignores the position Activision has put itself into that motivated them to be receptive of an offer to be acquired. It wasn't Microsoft's position in the market that made Activision want to sell. It was Activision.

 

[Inuhanyou]

This ignores the position Activision has put itself into that motivated them to be receptive of an offer to be acquired. It wasn't Microsoft's position in the market that made Activision want to sell. It was Activision.

And Activision can sell, but it's up to the regulators whether specifically selling to a publisher with an incentive to gatekeep content of industry changing magnitude away from sections of the market is conductive to competiton as it is argued.

There has never been a deal in the history of the gaming industry as big as this one, nor could there be with the kind of money being thrown around here on a level only MS could ever possibly afford. An exclusive cod deal alone would be eyebrow raising, actually eating the entire publisher and all 20 studios at once is another thing entirely.

This is why I don't really get Sony isolating their complaints to cod when again, they are clearly worried about far more than just the impact of losing cod as a neutral product

 

[Nesh]

This ignores the position Activision has put itself into that motivated them to be receptive of an offer to be acquired. It wasn't Microsoft's position in the market that made Activision want to sell. It was Activision.

Activision being open for acquisition for "reasons" like the mess a controversial CEO has created is irrelevant. It still doesnt change the initial argument that it doesnt justify MS acquiring a huge publisher.

 

[Shifty Geezer]

The numbers were already cooked the moment CMA created their own market definition.

That was the FTC.

Has anyone pointed out that the FTC put Nintendo into a sperate market by saying the market for "high performance video gaming console"? So even they don't consider Nintendo part of the same market. My problem with that is that every multiplatform game that is released that has a Switch version likely has an impact on all other versions. Same market IMO.

I'm not seeing the CMA making up nonsense. It's all spelled out in the report and I've quoted the CMA's reference to the console and gaming markets.

Even with the FTC's book-cooking, there's no 80:20 split discernible in the US/NA. Add Nintendo into the mix and Sony's so-called monopoly is even less!

The only legitimate claims to a skewed market, isolating Nintendo on grounds to maximise the MS-underdog perspective, is both EU where MS doesn't market/promote seriously, and Japan where poor XB can't get a hold and never will. Although we don't actually know what the situation is for XBS sales versus PS5 because MS doesn't provide numbers. Which helps with their underdog story as no-one can prove they aren't only 20% to Sony's 80% dominance, even against stories like this that make a 20:80 split pretty hard to envision:

However, for the tracked territories, 5.3 million consoles were sold last year, a drop of 25% over the year before.

Nintendo Switch was comfortably the No.1 console, despite sales falling by 15% over the year before. PS5 was a clear No.2 (sales down 35%), while the Xbox Series S and X consoles were the only platforms to report a sales growth year-on-year (up 4.4%) but it is in third position.

Switch was the No.1 selling console in almost every country with a few exceptions. In Denmark and Sweden, PS5 is the No.1 console, whereas Xbox Series S and X was No.1 in Norway.this MS claiming a worldwide split

 

[see colon]

Activision being open for acquisition for "reasons" like the mess a controversial CEO has created is irrelevant. It still doesnt change the initial argument that it doesnt justify MS acquiring a huge publisher.

Sure it's relevant. Activision isn't a silent partner in this transaction. And they aren't the victim of a hostile takeover. They were the ones that initiated the transaction, in fact. "Why did Microsoft buy Activision" is an answered question. Because Activision wanted them to.

I'm not saying a transaction this large should be excluded from regulatory oversight. All I'm saying is that viewing this in terms of just Sony's, MS's and Nintendo's market positions is a two dimensional view of the situation. Activision put itself in a position that it had to seek acquisition.

 

[Nesh]

Sure it's relevant. Activision isn't a silent partner in this transaction. And they aren't the victim of a hostile takeover. They were the ones that initiated the transaction, in fact. "Why did Microsoft buy Activision" is an answered question. Because Activision wanted them to.

I'm not saying a transaction this large should be excluded from regulatory oversight. All I'm saying is that viewing this in terms of just Sony's, MS's and Nintendo's market positions is a two dimensional view of the situation. Activision put itself in a position that it had to seek acquisition.

Nobody was discussing whether it was a hostile/forceful takeover of Activision or not though. That was never the subject of the discussion.

 

[see colon]

Nobody was discussing whether it was a hostile/forceful takeover of Activision or not though. That was never the subject of the discussion.

But the justification for the transaction is. It wasn't Microsoft's market position that instigated the Activision acquisition. It was Activision's position and... situation.

 

[Nesh]

But the justification for the transaction is. It wasn't Microsoft's market position that instigated the Activision acquisition. It was Activision's position and... situation.

I am confused by your argument. The market rules and consequences of such buy out dont change according to whether Activision wanted to be bought or not. So I dont see how justification fits in.
Its not like Microsoft was forced to buy it. MS was actively looking to expand its portfolio with large third party studios (as they have already done with Zenimax), and Activision was searching for buyers, with MS being the one to snatch the offer first. Whether Activision contacted MS saying "hey we are open for a buy out with this amount" changes nothing.

 

[AntShaw]

If Microsoft can't buy Activision, who can?

 

[Scott_Arm]

So in a hypothetical world where a large game company evaluates their financial situation and seeks a buy out from either Microsoft or Sony, is it in the consumers best interest to let that company slowly wither and die rather than have Microsoft or Sony become an even larger player?

Have to admit, I don't remember what Activision's motive for seeking a buyer was, but it seems odd that they'd do this unless they deemed it financially necessary.

 

[Nesh]

So in a hypothetical world where a large game company evaluates their financial situation and seeks a buy out from either Microsoft or Sony, is it in the consumers best interest to let that company slowly wither and die rather than have Microsoft or Sony become an even larger player?

Have to admit, I don't remember what Activision's motive for seeking a buyer was, but it seems odd that they'd do this unless they deemed it financially necessary.

You can see this multiple ways and they can be equally valid.

Not sure if Activision had financial troubles. But if its a result of their games not selling well enough and then being bought by a company is a completely different situation compared to a publisher/studio that has a significant presence with a list of highly successfull IPs and ability to bring out smash hits

 

[iroboto]

So in a hypothetical world where a large game company evaluates their financial situation and seeks a buy out from either Microsoft or Sony, is it in the consumers best interest to let that company slowly wither and die rather than have Microsoft or Sony become an even larger player?

Have to admit, I don't remember what Activision's motive for seeking a buyer was, but it seems odd that they'd do this unless they deemed it financially necessary.

A sign that many are seeing that the AAA game market is trending towards unsustainable. Without platform backing, a 3rd party on its own will live or die by its last title if development fees continue to rise.

Rising development costs, over saturated market, with too much competition at any moment, and not a big enough market for each game to find its own sustainable player base, means you need to pour even more money into the marketing to attract their audiences

 

[Shifty Geezer]

Furthermore, if these publishers can't operate profitably on their own, what enables them to operate effectively under the umbrella of a platform holder? It used to be that publishers didn't run trillions of studios but published other developers' titles. The problem perhaps is one of all these companies becoming too big. Break them down into smaller 'investment' firms that back developers, with a handful of elite, trustworthy internal studios that can be relied upon to produce profitable titles, and maybe they won't all be keeling over and dying from being unsustainably large?

That would imply that relentless growth as the end-game to all business is not a good idea though...

 

[see colon]

Furthermore, if these publishers can't operate profitably on their own, what enables them to operate effectively under the umbrella of a platform holder?

I'm not going to say this is what is going to happen, but theoretically you could trim some of the upper management and get rid of redundancy in marketing and distribution. Maybe even have all HR be handed by the parent company and have a skeleton crew in house for day to day concerns.

Have to admit, I don't remember what Activision's motive for seeking a buyer was, but it seems odd that they'd do this unless they deemed it financially necessary.

They have a scandal involving widespread harassment that looks to have been either covered up or accepted by the CEO that motivated walkout and a total lack of confidence in upper management. They also had a couple of lackluster Call of Duty releases that underperformed. Vanguard, WWII and Infinite Warfare were memorable underperformers, despite having sales that would be considered successful by most other games. This, coupled with Blizzards latest disappointments (HotS, Diablo Immortal, Overwatch 2), you could see them start to circle the wagons. After the Tony Hawk 1-2 remakes they moved VV to help with COD and then a Blizzard support Studio. Toys for Bob went from making Spyro and Crash games to being a COD support studio. They've put almost all of their eggs in those baskets.