Microsoft, Sony, Activision, & Third-Party Developers Respond to UK Authority's Findings on Acquisition

Microsoft, Sony, Activision, & 6 third-party developers responded to the UK Authority's provisional findings on the controversial acquisition. Among them, only Sony is hostile to the deal. 👀


Published: March 16, 2023 12:35 PM /

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Xbox Acvision Microsoft

Today the British Competition and Markets Authority (CMA) published Microsoft's, Sony's, and Activision's responses to its provisional findings, on top of comments from third-party developers. 

Microsoft's and Sony's comments are pretty much a reiteration of what we've heard many times already. Microsoft provided a massive 84-page document in which it "strongly disagrees" with the CMA's findings and argues that they do not provide plausible basis to argue that the merger would cause a significant lessening of competition in the UK. 

The company brings up the deals with Nintendo and Nvidia showing that Microsoft has no intention to make Call of Duty exclusive to Xbox platforms. On top of that, Microsoft has provided "a comprehensive package of licensing remedies" that would guarantee parity between Xbox and PlayStation and preserve the "substantial customer benefits" coming from the merger. 

Microsoft also argues that prohibiting the acquisition would squander its benefits for the customers to protect PlayStation, which is the dominant console platform. 

"The CMA faces a stark choice. A clear path forward with remedies, which would deliver increased competition and substantial benefits to UK gamers, or a prohibition decision which would squander these benefits in order to protect the position of the dominant console platform."

Sony keeps arguing as it did before with its own document, obviously supporting the provisional findings that are pretty much in line with its position, and mentioning that Microsoft would have the ability to hinder Sony's ability to compete by making Call of Duty exclusive and has the incentive to do so. Even if it wasn't made exclusive, Sony keeps bringing up the possibility that Microsoft could somehow make the PlayStation version worse in a number of ways

The house of PlayStation mentions that Call of Duty's importance would give Microsoft the ability to block its rivals' capability to compete and this would cause "irreparable harm to the console and cloud gaming industry, to the detriment of gamers and competition." According to Sony, "the way to prevent that harm is for the Transaction to be blocked."

Interestingly, Sony argues that the acquisition of Mojang is irrelevant as an example of Microsoft not pursuing exclusivity because "Minecraft is a single release game that is already in users’ hands: unlike Call of Duty, there are no future releases of Minecraft."

While this is technically accurate, it's hard not to see it as a significant distortion of the truth. It's true that (for now) there are no future releases of Minecraft, but there certainly are future releases of the Minecraft franchise. As a matter of fact, Minecraft Legends is releasing in just a month, on April 18, 2023, for Xbox Series X|S, Xbox One, PS5, PS4, Nintendo Switch, and PC. Sony's arguments conveniently omit this fact. Your mileage may vary on whether this can be identified as full-fledged dishonesty or disingenuity. 

Activision's document is a strongly-worded rebuttal of the CMA's provisional findings, accusing the authority of being simply "wrong." According to the publisher, the CMA has "failed to read the evidence in its full and proper context" by "quoting selectively or misrepresenting the documentary evidence" and "taking statements out of context to support its own case."

As such, the provisional findings "cannot be supported based on the extensive evidence before the CMA. The CMA’s findings are entirely unsubstantiated and must be revised to reflect the reality of Activision Blizzard’s position in respect of cloud gaming."

The CMA also published documents from six third-party developers including 4J Studios (known for porting Minecraft to consoles) and five more studios that opted to remain anonymous. All are either in favor or neutral to the acquisition. 

4J's statement, penned by co-founder Chris van der Kuyl, includes an interesting point that pretty directly contradicts Sony's position, explaining that not only Microsoft has never pressured the developer to favor Xbox, but it actually encouraged it to develop unique content for other platforms. 

"During the phase of Microsoft ownership we have never been under any pressure to favour Microsoft owned formats, indeed we were actively encouraged by Microsoft to develop unique content such as the “Mario Mash Up” pack for Nintendo formats. Microsoft have also brought significant stability and rigour to our contractual and commercial relationships and have been both fair and professional in all our dealings with them."

On top of that, "Microsoft has honored every element of the agreements that they inherited and also extended our relationship significantly to cover new formats, like Nintendo Switch, as well as many other content enhancements."

Another developer argues that no game can be considered a "must-have" in the industry. 

The CEO of a third independent studio mentions that in their experience Microsoft has always respected contracts and obligations, while consolidation is inevitable.  On top of that, they raise concerns on the possibility that Tencent would purchase Activision if Microsoft was not allowed to.

"China-based giant Tencent is already an investor in Activision. If Microsoft is prevented from acquiring Activision, would the UK consumers be better served if they were acquired by Tencent instead ? Chinese publishers in our industry benefit from an unfair advantage due to the fact that the China market is closed to Western companies through various regulations while Chinese companies can freely access the Western markets. Letting Microsoft and Activision consolidate their business in light of this fast-growing competition would not be against the interest of UK consumers."

The fourth studio keeps a more neutral stance, mentioning that it's difficult to predict the effects of the acquisition on the market, but it doesn't predict adverse effects on its own business.

The fifth studio explains that its sales on PlayStation have been stagnant because the vast majority of the market on Sony's console is taken by large games by huge publishers and PlayStation doesn't provide a level playing field for every developer. Smaller games on Sony's platform will rarely be showcased organically to users and developers have to rely on said users already knowing about the game and actively searching for it.

On the other hand, revenue on Xbox is higher because Microsoft provides numerous methods to find smaller games including special sections of the store and Xbox Game Pass. On top of that, the developer believes that the acquisition "can only be a good thing for smaller-to-mid sized business" as it will lead to better sales of Xbox, which provides a better ecosystem for discoverability. 

Lastly, the developer argues that the acquisition will increase the ability of Microsoft to compete, forcing PlayStation to up its own game, which is "sorely needed."

"The acquisition will not all of a sudden make Xbox the dominant platform. It's far more likely that it may help to create a more level playing field between Xbox and PlayStation which, at this point in time, is sorely needed. PlayStation needs better competition, to force the platform to up its game, and this will surely help to do that."

The sixth studio found the arguments against the acquisition to be "slightly exaggerated and out of proportion" and blocking it would instead hinder competition in favor of the market leader.

"We honestly found the arguments against this acquisition to be slightly exaggerated and out of proportion. We are worried that actual real competition and more innovative consumer friendly initiatives, could be potentially hindered by blocking this, by potential market leaders/competitors, who might not be ready or might believe in a different strategy, or just not compelled to change their status quo on the market."

On top of that, the developer mentions that the acquisition would likely improve working conditions for Activision's employees who would find a new home at Microsoft. 

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Learn more about Minecraft
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Developer
Mojang
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Xbox Game Studios
Release Date
May 17, 2009 (Calendar)
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