Indefinitely borrowing this from elsewhere…
Decision from Conselho Administrativo de Defesa Econômica - CADE in Brazil | APPROVED WITHOUT RESTRICTIONS
Abridged version:
RELEVANT MARKETS
Relevant markets considered:
A) Game development and publishing (it includes games for all devices, PC games, consoles and mobile) in Brazil and worldwide.
The combined market share of the parties was below the level of 20% in all possible relevant market scenarios examined, indicating that the transaction in question would not imply a significant increase in the level of concentration of the game publishing market.
B) Digital game distribution (it includes PC and consoles games) in Brazil and worldwide.
The only scenario in which the market share held by the parties is slightly above the level of 20% is when the PC and console game distribution segments are considered as a relevant market on a global scale. Even in this scenario, the majority of the share corresponds to MS, so the share added by ABK is not relevant enough.
C) Game consoles, in Brazil and worldwide.
The sum of market shares held by the parties amounts to a percentage lower than 20% in all of them. Not relevant enough.
D) Online advertising (it includes display advertising and in-game ads), in Brazil only.
The combined
market share of the parties in 2022 was less than 10% in all scenarios considered in the analysis. Not relevant enough.
E) Merchandising, in Brazil only.
The parties would have a joint
market share of only 0-10% in the national licensing market in 2021, a percentage unable to generate risk to the competition.
Big difference between consoles + PC and mobile. It seems unlikely that the interested consumer in playing the latest AAA releases of the industry consider smartphones and tablets as capable of replacing consoles and PCs as hardware geared towards games. Likewise, casual gamers who prefer fast-paced games would hardly consider PCs and consoles as close replacements for their mobile devices.
PCs and consoles, in turn, seem to be perceived as closer competitors. Even Sony, a traditional
playerin the console segment, has recently started to publish games that were exclusive to the PlayStation for computers.
SUBSCRIPTION SERVICES
Important differences between the services offered right now in the market (Gamepass, PS Plus, EA Play, Luna, Ubisoft+, etc). In any case, the unanimous understanding expressed by the consulted companies is that subscription services would not constitute a specific product market. From a consumer perspective, subscription services would be perceived as direct competitors of individually marketed games, and therefore should be considered in the context of a broader market of wide distribution of games
Subscription services are still not very representative in relation to the total revenue generated from the sale of game content, and, according to industry expectations, they should continue to coexist with other payment models. IDG Consulting estimates that, in 2025, subscriptions will represent around 14% of console-related revenues, an increase of only 4% compared to 10% in 2020, and 22% when excluding
hardware sales.
The eventual inclusion of Activision Blizzard's extensive back catalog on Xbox Game Pass could in fact reduce Microsoft's demand for third-party content for the service, but it doesn't seem likely that the company will stop offering third-party games to its subscribers after the operation. Any decision in this regard would be inconsistent with Microsoft's recent strategy, which has increasingly invested in expanding the offer of games on Game Pass for console and PC users. If Microsoft decided to make the Xbox Game Pass subscription service exclusive to first-party content, it would likely reduce its attractiveness to current and potential consumers and publishers would still have other channels available (PlayStation Store, PS Plus, Nintendo eShop, Xbox Store itself or even physical media games).
The latest Activision Blizzard games are currently not available on any multi-game subscription or cloud gaming subscription services. Microsoft executives have already publicly stated that they intend to bring franchises such as Call of Duty and Diablo to Game Pass if the transaction is approved. In this regard, it is reasonable to assume that the Activision Blizzard catalog will likely not be made available to Game Pass competitors. Despite the relevance of Microsoft's and Activision Blizzard's game portfolios in terms of quantity, quality, variety and popularity, the estimates presented by the parties indicate that their combined share in the game publishing market would be approximately 0-10% on PCs and 10-20% on consoles worldwide. Therefore, even post merger there is still a considerable universe of games that could be explored by current and potential Game Pass competitors.
CADE believes that the considerable
market shareheld by Microsoft in all scenarios portrayed is due not only to the quantity and variety of content available on
Game Pass, but also to the company's pioneering spirit in offering this type of service.
Despite this, the fact that Microsoft entered the multi-game subscription segment before its competitors in the console market does not translate into a
permanentcompetitive advantage for
Game Pass. Both Sony and Nintendo have a vast catalog of exclusive games in their ecosystems, partnerships with several
third-partypublishers, and a broad base of captive consumers among their console users. In this sense, it is understood that there is still plenty of room for these companies' subscription services to develop in scope and content in the coming years, in order to become increasingly competitive.
In any case, it is interesting to note that, despite the fact that the PlayStation Plus service is only available on PlayStation consoles and has only recently migrated to a multiple-game subscription model similar to Game Pass, Sony still held a higher market share than by Microsoft in 2021.
On PCs, Game Pass is currently the only subscription service that offers a library of games from multiple publishers for download. In the current scenario, Microsoft holds a substantial share in the segment, especially in Brazil. However, such a situation would not prevent new players from entering the market. As already noted, Microsoft and Activision Blizzard together represent less than 10% of the PC game publishing market, both globally and nationally. In particular, companies such as Valve and Epic Games, which are relevant game publishers and also operate quite successfully in the digital distribution market, wouldn't have greater difficulties in developing and implementing their own subscription services.
CLOUD GAMING
Subscription services with
cloud gaming seem to have special potential to transform the structure of the industry over the next few years, as they dispense with the use of dedicated
hardware to access state-of-the-art electronic games. In this way, such services can be seen as competitors not only of other subscription services and digital stores that distribute games, but also, to some extent, of console manufacturers.
With regard to
cloud gaming services, such as Google
Stadia, Amazon
Luna and
GeForce Now, CADE considers that, in the current scenario, the possible difficulties faced by such services in competition with
Game Passare more related to the (still) low popularity of the game
streaming model than to the game content exclusive to Microsoft's service.
Indeed, although many point to the streaming of games via the Internet as the likely future trend of the video game industry, the fact is that consumer adherence to cloud gaming services is still relatively low. Furthermore, expert projections do not seem to indicate that
streaming games across multiple devices will be able to supplant the current "
device-centric" model prevalent in the industry, based on the use of dedicated gaming
hardware , in the near future. According to estimates by Omdia, the share of
cloud gaming services in consumer spending on games is expected to increase from 2.1% in 2021 to 6.1% in 2026, a growth that, despite being quite expressive, still seems insufficient to break the current paradigm of the sector.
The technological challenges to the growth of
cloud gaming on a global scale and the still low adherence of consumers to the model are possibly factors that motivated Google to close its exclusive game development studios for
Stadia in 2021, and they could also influence the decision of Microsoft and Sony to stop offering their
Xbox Cloud Gamingand
PlayStation Now cloud gaming services independently to consumers.
Even if all these difficulties are overcome, CADE does not expect that the acquisition of Activision Blizzard by Microsoft is an impediment to the development of competitors and the entry of new companies in the segment. Specially when, among the companies that offer cloud gaming services, there are extremely sophisticated
players such as Google (responsible for Stadia) and Amazon (responsible for
Luna), both global leaders in their respective core businesses and well positioned among the largest companies in the world. If there is interest and incentives, companies like Google and Amazon have more than enough resources to invest in hiring talent, creating their own development studios, in partnerships with successful
publishers , or even in the incorporation of large game studios or publishers.
Nevertheless, the challenges imposed on the entry of new providers of subscription services for games and
cloud gaming do not seem, in essence, very different from those faced by Microsoft when it launched the first Xbox in 2001, in a console market dominated by Sony and Nintendo; or those faced by Sony at the launch of the first PlayStation in 1994, when the company entered a market divided between Nintendo and SEGA and, shortly afterwards, became the leader in the segment.
DATA ACCURACY
It should also be noted that some of the companies consulted during the procedural instruction, such as Sony, Ubisoft and Warner Bros., also presented their own estimates regarding the total size of some of their markets, and the sources indicated by these companies were quite similar (or even identical) to those mentioned by MS/ABK. In this sense, it is noted that the estimates presented by the parties are based on data and reports from sources perceived as reliable by other relevant
players in the video game industry.
ALTERNATIVES TO ABK GAMES
Most of the companies consulted signaled that Activision Blizzard games would face rivalry from similar competitors across all platforms, with Ubisoft having categorically stated that "
there is no such video game title that does not have close competition" , as
"every publisher and every game competes for available playtime, and no title is alone in its genre of game".
1/2
must really be feeling the heat and need some support from the public.
news.microsoft.com
