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| Photo Credit: AP. |
(AP) - Microsoft’s plan to buy video game giant Activision Blizzard for $68.7 billion could have major effects on the gaming industry, transforming the Xbox maker into something like a Netflix for video games by giving it control of many more popular titles.
But to get
to the next level, Microsoft must first survive a barrage of government
inquiries from New Zealand to Brazil, and from U.S. regulators emboldened by
President Joe Biden to strengthen their enforcement of antitrust laws.
More than
seven months after Microsoft announced the deal, only Saudi Arabia has
announced its approval, although an upcoming decision from the United Kingdom
to close or escalate its antitrust probe could signal what’s to come. That
decision is expected Thursday.
“A growing
number of countries are subjecting major global transactions to deeper
scrutiny,” said William Kovacic, a former chairman of the five-member U.S.
Federal Trade Commission. “Many of the jurisdictions that are exercising that
scrutiny are significant economies and can’t be brushed off.”
Microsoft
has faced antitrust scrutiny before, mostly notably more than two decades ago
when a federal judge ordered its breakup following the company’s
anticompetitive actions related to its dominant Windows software. That verdict
was overturned on appeal, although the court imposed other, less drastic,
penalties on the company.
In recent
years, however, Microsoft has largely escaped the more intense regulatory
backlash its Big Tech rivals such as Amazon, Google and Facebook’s parent
company Meta have endured. But the sheer size of the Activision Blizzard merger
has drawn global attention.
The all-cash
deal is set to be the largest in the history of the tech industry. It would give
Microsoft, maker of the Xbox console and gaming system, control of popular game
franchises such as Call of Duty, World of Warcraft and Candy Crush. There’s
also a growing sense that past review of Big Tech mergers was too lax — such as
when Facebook bought Instagram in 2012 and WhatsApp in 2014.
“Collectively,
that means that the kinds of concessions you’re going to have to make become
more difficult,” Kovacic said.
The
possibility of Microsoft gaining control of Call of Duty has been particularly
worrisome to Sony, maker of the PlayStation console that competes with
Microsoft’s Xbox. In a letter to Brazilian regulators, Sony emphasized Call of
Duty as an “essential” game — a blockbuster so popular and ingrained that it
would be impossible for a competitor to develop a rival product even if they
had the budget to do so.
One solution
could be a settlement in which Microsoft agrees to ensure that console-making
rivals such as Sony or Nintendo won’t be cut off from popular Activision
Blizzard games. Microsoft has already publicly signaled its openness to that
concept.
On the other
hand, Microsoft also has a much better reputation in Washington than it did in
2000. It is “seen as more reasonable and sensible” on issues such as data
privacy, Kovacic said.
Microsoft
has also been working to win over skeptics in the U.S., starting with a labor
union that’s been trying to organize Activision Blizzard employees. Democratic
lawmakers have also expressed concern about allegations of Activision’s toxic
workplace culture for women, which led to employee walkouts last year as well
as discrimination lawsuits brought by California and federal civil rights
enforcers.
In March,
the Communications Workers of America had issued a call seeking tougher
oversight of the deal from the U.S. Department of Justice, the FTC and state
attorneys general. But a June 30 letter from the union to the FTC said it had
switched to supporting the deal after Microsoft agreed “to ensure the workers
of Activision Blizzard have a clear path to collective bargaining.”
Gaming
represents a growing portion of Microsoft’s business, despite the company’s
efforts to portray itself and Activision Blizzard as “small players in a highly
fragmented publishing space,” per a document filed with New Zealand’s Commerce
Commission.
In 2021,
Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of
video game publisher Bethesda Softworks, which is behind popular video games
The Elder Scrolls, Doom and Fallout. Microsoft’s properties also include the
hit game Minecraft after it bought Swedish game studio Mojang for $2.5 billion
in 2014.
The Redmond,
Washington, tech giant has said the gaming acquisitions will help beef up its
Xbox Game Pass game subscription service and its mobile offerings, particularly
from Activision Blizzard’s King division, which makes Candy Crush.
Dutch game
developer Rami Ismail said Microsoft’s subscription-based service has thus far
been a positive for smaller game studios trying to get their content to users.
But he’s unsure about the long-term impact of the merger.
“Xbox Game
Pass as a product has been really good in getting interesting, creative games
funded that might not have the normal market reach to be successful,” Ismail
said. “On the flip side, as power consolidates, there is less of an incentive
to do anything like that.”
Microsoft
rivals are also consolidating. Sony in July closed on a $3.6 billion deal to
buy Bungie Inc., maker of the popular game franchise Destiny and the original
developer of Xbox-owned Halo. Take-Two Interactive, maker of Grand Theft Auto
and Red Dead Redemption, in May completed a $12.7 billion deal to acquire
mobile gaming company Zynga, maker of FarmVille and Words With Friends.