Microsoft Competition authorities examine record acquisition of Activision LHumanite

Microsoft: Competition authorities examine record acquisition of Activision – L’Humanité

In December, the Federal Trade Commission (FTC), which is responsible for monitoring anti-competitive practices and in particular monopoly positions in the USA, blocked Microsoft’s takeover bid for Activision, which had been announced with great fanfare, for just one more year. At $68.7 billion — a big Twitter and a half — it would be the biggest acquisition in new technology history. The first court hearing between the FTC and the digital giant, which is still hoping for a conclusion of the transaction next summer, will therefore take place this Tuesday. For its part, the European Commission launched an investigation before commenting on the transaction.

Microsoft unexpectedly hit two

It is the Xbox division dedicated to video games and the console of the same name from Microsoft that should take over Activision Blizzard, the largest developer and publisher of video games in the United States, notably owners of Call of Duty, World of Warcraft or Candy Crush -Saga. Despite the size of the acquisition, Microsoft didn’t anticipate opposition from regulators. They actually don’t care much about vertical integrations like this: A console manufacturer buys a video game publisher. It is often the horizontal ventures, consisting of acquiring a direct competitor, that create monopoly risks.

But Microsoft encountered two unforeseen events. Lina Khan, appointed head of the FTC by the Biden administration last year and credited author of the “Amazon cartel paradox,” is seen as a putative defender of Gafam’s expansionist policies, which she knows well. “Today we are trying to prevent Microsoft from taking control of a leading independent games studio and using it to harm competition in several dynamic and growing games markets.” US regulator.

For its part, Sony, maker of the PlayStation and Microsoft’s main competitor in the home console segment, has lobbied hard to prevent the takeover. The Japanese giant relies heavily on Call of Duty to sell pallets of its consoles each year and fears the game will become an Xbox exclusive. Phil Spencer, the head of the Xbox division, has done everything to defuse the dispute: He suggests including a ten-year non-exclusivity in the purchase agreement and points out that his company may have bought Minecraft in 2014, they never reserved the game for Microsoft platforms. Contrary to what its Japanese rivals are doing, the American giant denounces in its response to the FTC: “Not only does Sony receive totally exclusive content, but it is also entering into negotiations with third-party providers that will exclude Xbox from the list of Include platforms where developers can publish their game.”

Towards a “Netflixization” of video games

And in fact, this strategy does not seem to be Microsoft’s, which is more aimed at “Netflixization” of video games. By offering many development studios and successful licenses, the company aims to expand the content offering of its Xbox Game Pass, a subscription for consoles and PC that offers access to a large video game library. Microsoft firmly believes in this and the figures for 2021 prove him right, with more than 25 million subscribers for almost 3 billion in sales, while Sony remains conservative and bets on its exclusive products that are sold at a high price. A dead giveaway, the number of Game Pass subscribers is one of the targets used to calculate Microsoft’s CEO annual performance bonus.

This record acquisition is more comparable to Amazon, which this year offered the MGM studios (James Bond, Rocky etc.) to extend their Prime Video subscription. This acquisition would also be a backdoor way for Microsoft to return to the mobile world after failing in the smartphone market with Windows Phone. Because under the hood of Activision, there’s Candy Crush, which is still played by 273 million people every month, even though only 200 million households are equipped with game consoles.

Activision’s almost 10,000 employees therefore remain on the sidelines. Poorly paid and exposed to intense work streaks, they are not in an ideal situation… The state of California also filed a lawsuit against the publisher in mid-2021 based on a two-year investigation, accusing the company of a “boys club” culture and the ” allow sexual harassment”. In an open letter, several hundred employees had even demanded the resignation of the CEO, who was accused of turning a blind eye to this behavior and protecting its authors. After the takeover bid, the head of the Xbox division made a clear appeal to them: “We recognize the need for these employees to feel safe, heard and paid appropriately to do a good job,” said Phil Spencer.