Indefinitely borrowed again, I can definitely see many articles coming from this. Like; Xbox Dumped COD, News At Eleven! Sucks that much of it is redacted.
1/2
——————————————————————————————————————————————————————————————————
Well, I finally read the
whole response from MS (111 pages). So, long post incoming
I think that it is quite good. For starters, the tone is very different from the first one, where you could feel that they were annoyed by the decision.
From pages 13 to 69 everything is about Call of Duty: There is an insane amount of work on those pages. :O I really like how they dissect piece by piece every potential issue. And the amount of data presented is staggering.
A paragraph that I liked in this case: MS is not denying the relevance of COD, but the data doesn't automatically show that COD is the only game to attract gamers to a console or that losing it would become critical (Page 25)
While these assertions are central to the case for referral, they are not supported by any evidence. Instead, the Phase 1 Decision relies on high level points such as "CoD is currently one of the largest game franchises", "has a high level of awareness amongst gamers" and "has been consistently successful for nearly a decade". These points may all be true (as they are equally for other popular games), but do not show that the franchise is critical to attracting gamers to a console platform, nor that the loss of that one franchise would foreclose the console in question from the downstream market
. No evidence has been provided to suggest that other Activision titles have any degree of market power. As above, the share of these titles is minimal ([0-5]% or less).
From pages 70 to 90 everything is about Gamepass: I think that they offer good arguments, specially the ones about ABK (extensively) being against subscriptions if there is no deal. Therefore, saying that without the merger all competitors could potentially have access to all the ABK content doesn’t make a ton of sense because all the evidence points against that: without the acquisition Activision is not interested in subscription services (not even their own).
From pages 91 to 111 everything is about cloud gaming: I thought that it was the most complicated issue but they again present a ton of (internal) data, in this case to downplay cloud gaming as viable option in the short - medium term. The ecosystem theory of harm is counter-argued by also downplaying the importance of Azure for xCloud or the lack of economic incentive to 'block' similar services in the future.
All in all, a very good answer with tons and tons of data.
Anyway, I took notes of things that I believe are new and interesting:
Specific notes from the CMA
The page for the case now includes a notice that is not present in other mergers in Phase 2 (I guess that they felt some pressure):
Evidence
The publication of the evidence of any party on the CMA's webpages does not indicate in any way endorsement by the CMA of the views expressed in the evidence or acceptance of that evidence. Publication in this way is designed to assist public understanding of the issues.
On the other hand, it looks like they‘ll share more responses from other third parties:
The CMA received a large number of submissions from the public, which it is still in the process of reviewing, and which it will take into account, where appropriate, in the course of its merger investigation.
The future Universal Store is a risky move (pages 12-13)
As Mr. Spencer explained because of "[X]." In particular, the concept of a next- generation game store that operates across a range of devices ("Universal Store") is risky… Moving consumers away from the Google PlayStore and Apple AppStore on mobile devices will require a major shift in consumer behaviour. Microsoft hopes that by offering well-known and popular content, gamers will be more inclined to try something new. But this is far from guaranteed and also depends on proposed regulations and legislation in the U.S., and around the world, that would require Apple and Google to make their platforms and app stores more open to third-party stores and commerce platforms. As such, in seeking approval from its Board of Directors as a public company, Microsoft leadership could [X]. Nevertheless, as Mr. Spencer confirmed, Microsoft will measure the strategic success of the Merger on [X].
MAU for PlayStation and Xbox (page 35)
Publicly available data suggests that PlayStation MAUs in 2021 are more than double Xbox MAUs (107 million versus [X] million).
Steam Deck is a new console for MS (page 3
Steam has launched a new console without Call of Duty: The Steam experience is also directly relevant to console, as Steam has recently launched a new console, the Steam Deck, without Call of Duty. The Steam Deck is a handheld console which has a docking station that allows it to be plugged into a television or used as a PC. 141 The console runs on a Linux-based operating system and allows gamers to access Windows PC games through the Steam digital storefront. In the words of Valve, "[t]he Proton translation layer allows most Windows games to run with equal or better performance on Steam OS without requiring game developers to do any heavy porting work to get their games running". This means that there are thousands of games available to play on the Steam Deck – and as explained above this does not currently include Call of Duty. Valve has promoted the Steam Deck using a range of other popular titles (including a number of Sony first-party titles) – see Figure 32 below.
The extreme levels of monetisation used by ABK regarding COD (pages 39-40)
Even though Activision has faced a strong incentive to monetize every form of exclusivity which makes sense for Call of Duty, there has been no foreclosure: Activision has had a strong incentive to come up with different forms of content and marketing exclusivity which it could monetize in its negotiations with Microsoft and Sony. Since 2005 these marketing arrangements have included: (i) exclusive console marketing arrangements following the release of new titles and downloadable content; (ii) priority access to new maps (until these were phased out following the introduction of cross- platform play); (iii) exclusive access to the online alpha version of the game and access to the beta version of the game 5 days earlier than gamers on Xbox consoles or PC; (iv) game bonuses such as extra "tier skips" on the battle pass; (v) the ability to access additional "experience points" (e.g., through exclusive events); and (vi) certain in-game character customisations and content bundles.
MS left ABK in 2015, not the other way around (page 41)
Sony was not foreclosed when Call of Duty was exclusive to Xbox: There is no indication, based on Call of Duty's prior history of differentiation between versions of Call of Duty on Xbox and PlayStation, that this could in any way affect rival consoles' ability to compete effectively. Sony's share of console sales grew in the period from 2005-2015 when Xbox had certain exclusive rights to Call of Duty content. There are many more popular games available in the market in 2022 than there were between 2005 and 2015 (including Fortnite, PUBG, Apex Legends, Elden Ring and many others). If anything, Call of Duty's importance as a franchise was greater in 2005-2015. When Xbox decided not to continue with the Call of Duty co-marketing agreement in 2015, it simply found other ways to market and promote its platform. Sony, as the market leading console with an extensive first-party and third-party exclusive game catalogue, is even better placed to do the same.
(c) Microsoft [X] Call of Duty exclusivity: Microsoft's exclusive arrangements for Call of Duty content expired at the end of 2015. (Page 31)
(d) Microsoft did not expect [X]. Microsoft did not [X], but does not believe this agreement [X]. Microsoft was not foreclosed as a result of the agreement. (Page 31)