Bloomberg has just reported something that further increases the likelihood of regulatory approval of Microsoft's $69B acquisition of Activision Blizzard King: Microsoft's offer to keep Call of Duty available on Sony's PlayStation also includes that Sony may add the game to its subscription service.
Sony is the only vocal complainant. The leading gaming console maker argues that Microsoft would later engage in vertical foreclosure, claiming that Call of Duty is a must-have title and that hardly anyone besides Activision Blizzard can make "AAA" titles at all. Apart from that argument not making economic sense--as a think tank explained--Microsoft is ready to extend a ten-year license to Sony, but Sony's only desire is to torpedo the transaction.
In last week's FTC complaint as well as statements by other competition authorities, vertical foreclosure theories are not limited to video game consoles but also involve subscription services. In my analysis of the FTC complaint, I criticized a market definition that focuses on how gamers pay (such as a monthly $10-20 fee for access to multiple games vs. "freemium"--which most online games are--or a one-time purchase price of typically $60-70 for console games). In any event, some observers believe that regulators may be even more concerned about competition among multi-game subscription services than in the console market.
The fact that Microsoft is prepared to make a far-reaching concession with a view to subscription services ups the pressure on Sony. Competition authorities can't withhold clearance (much less litigate for many months) when the key complainant is simply not being constructive and continues to refuse a deal that would actually address the stated concerns.
Investors were underwhelmed by the FTC complaint, and today ATVI's stock price gained approximately 3%, largely because of the Bloomberg article on Microsoft's preparedness to make Call of Duty available to Sony's subscription service. But this was not the only piece of good news for the transaction: the UK Competition & Market Authority (CMA) published the response (PDF) of a "Market Participant A" to its Issues Statement. That company--presumably a large game maker--explains that--and why--Microsoft's acquisition of Activision Blizzard is procompetitive, with the submission specifically also mentioning Microsoft's app store plans. That company declares itself in support of reasonably strong competition enforcement in the technology industry, and generally--with just this exception here--welcomes the CMA's approach to the technology industry. (As do I.)
