Microsoft: Competition authorities are investigating the record takeover of Activision

The Federal Trade Commission (FTC), which in the US is responsible for monitoring anti-competitive practices and especially monopoly positions, blocked Microsoft’s takeover bid for Activision in December, announced with great fanfare just a year ago. At $68.7 billion – one and a half the size of Twitter – it would be the largest acquisition in the history of new technologies. This Tuesday will therefore see the first court hearing between the FTC and the digital giant, which still hopes to complete the deal next summer. The European Commission, for its part, has launched an investigation before giving its opinion on the transaction.

Microsoft ran into two unexpected

It was the Xbox division, dedicated to video games and Microsoft’s eponymous console, which was to absorb Activision Blizzard, the largest developer and publisher of video games in the United States, notably owner of Call of Duty, World of Warcraft Where Candy Crush Saga. Despite the size of the acquisition, Microsoft did not expect to face opposition from regulatory authorities. These actually care little about vertical integrations, as is the case here: a console manufacturer buys a video game publisher. It is often the horizontal ventures that consist of taking over a direct competitor that create monopoly risks.

But Microsoft ran into two unforeseen events. Lina Khan, appointed by the Biden administration last year to head the FTC and acclaimed author of the “Amazon antitrust paradox,” is a supposed defender of Gafam’s expansionist policies, which she knows well. “Today, we seek to prevent Microsoft from taking control of a leading independent game studio and using it to harm competition in several dynamic and growing game markets,” assured the US regulator.

For its part, Sony, the PlayStation maker and Microsoft’s biggest competitor in the home console segment, has begun intense lobbying to prevent this takeover. The Japanese giant bets hard every year on call of duty to sell pallets of its consoles and fears the game will become an Xbox exclusive. Phil Spencer, the boss of the Xbox division, has gone out of his way to refute the argument: he suggests including the non-exclusivity over ten years in the sales agreement and points out that his company may have bought Minecraft in 2014, it never reserved the game for Microsoft platforms. Contrary to what its Japanese competitors do, the American giant condemns in its response to the FTC: “In addition to getting full exclusive content, Sony is entering into negotiations with third-party publishers that involve excluding Xbox from the list of platforms on which developers can publish their games.”

Towards a “netflixization” of video games

And this strategy doesn’t actually seem to be Microsoft’s, which rather aims for a “netflixization” of video games. By offering itself many development studios and successful licenses, the company wants to expand the content offered in its Xbox Game Pass, a subscription available on consoles and PC that gives access to a large video game library. Microsoft firmly believes it, and the figures for 2021 prove it right, with more than 25 million subscribers to almost 3 billion in revenue, while Sony remains conservative by betting on its exclusive items that are sold at a high price . An unmistakable sign, the number of Game Pass subscribers is one of the measures used to calculate the Microsoft CEO’s annual performance bonus.

This record acquisition should be better compared to Amazon, which this year offered MGM studios (James Bond, Rocky…) to extend your Prime Video subscription. This acquisition would also be a way for Microsoft to return to the mobile world through the back door, after failing in the smartphone market with Windows Phone. Because that’s in Activision’s hood Candy destruction, still played every month by 273 million people, when there are only 200 million households equipped with gaming consoles.

The almost 10,000 Activision employees will therefore remain on the sidelines. Poorly paid and subject to intense work periods, they are not in an ideal situation… The State of California also filed a complaint against the publisher in mid-2021, based on an investigation carried out over two years. , accusing the company of allowing a culture of “boys’ club” and “sexual harassment” to continue. In an open letter, several hundred employees had even asked for the CEO’s resignation, accused of turning a blind eye to this behavior and protecting their writers. After the takeover offer, the head of the Xbox division made a clear appeal to them: “We recognize the need for these employees to feel safe, listened to and properly paid to do a good job,” had assured Phil Spencer.

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