Just in time for Christmas, the Federal Trade Commission has put on its bright green Grinch costume, hitched up Max the dachshund to his sleigh, and set its sights on ruining the Whoville Christmas (and everyone else’s) by blocking Microsoft's bid to acquire Activision Blizzard, the maker of video game franchises such Call of Duty and World of Warcraft.
Earlier this year, Microsoft announced its intention to pay $69 billion for the Santa Monica, California-based game publisher, which distributes popular videogame titles including Overwatch, Diablo, and Candy Crush.
The FTC is seeking to prevent the merger and has argued that the merger would be anti-competitive. Further, it would allegedly "enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."
In a press release, federal regulators cited Microsoft's 2020 acquisition of ZeniMax, the parent company of Bethesda Softworks, as an example of how the software giant can suppress competition. Two of Bethesda's upcoming games, Starfield and Redfall are expected to be Microsoft exclusives despite Microsoft's assurances to European regulators "that it had no incentive to withhold games from rival consoles."
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, director of the FTC’s bureau of competition, in a statement. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
Microsoft President Brad Smith tweeted a response to the FTC saying, "We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court."
"Our acquisition will bring Call of Duty to more gamers and more platforms than ever before," Smith said. "Any day @Sony wants to sit down and talk, we'll be happy to hammer out a 10-year deal for PlayStation as well."
Why It Matters.
Anybody who knows me likely knows my appreciation for a good military themed video game and one of the best series out there is undoubtedly Call of Duty. At the same time, I am no fan of monopolies in general or Microsoft in particular, but it is important to understand that the motivation underlying the government’s actions in this instance have much less to do with consumer protection and much more to do with the ongoing battle between software behemoths.
Of course, acquisitions can help video game companies build a roster of video games playable on their specific console – and only on their system in some cases. For instance, Sony has seen PlayStation sales driven by the Spider-Man and God of War games. In 2019, Sony paid $229 million for Insomniac Games, which is currently working on Marvel's Spider-Man 2, a PlayStation 5 exclusive due in 2023.
Microsoft has games such as Halo Infinite and Forza Horizon 5 playable only on Xbox. Exclusive games also help tech giants' online game streaming services, too.
Indeed, Sony is just as protective of its monopoly over game titles for its PlayStation as Microsoft is over its XBox games and rightly so. After all, they’re both ginormous software companies trying to compete in a crowded marketplace where the potential payoff includes annual revenues followed by a considerable number of zeroes.