A bright and sunny, hardly-any-clouds morning in Portland, Oregon, on Wednesday 11 January, 2023, and today’s challenge to write a newsletter in under 15 minutes.
I’ve been thinking about the Microsoft / Activision acquisition that seems increasingly unlikely to complete and why I’m nervous about it.
The story so far:
Microsoft, a giant company, wants to buy Activision Blizzard, a slightly less giant videogame company, for $68.7 billion dollars, which as of writing is about 8.7 billion dollars more than its market cap.
The proposed acquisition has made several people at the very least nervous, not least of which I imagine are executives at Sony Interactive Entertainment, the bit of Sony that looks after PlayStation.
Microsoft and Sony are in competition because they each make videogame consoles and are in the videogame business.
Activision Blizzard both publishes games as well as owns studios that make games. Some of its most famous games include Call of Duty, a series that began in 2003 and is still going strong. Call of Duty is a sort of poster child for the videogames industry, it’s right up there with Mario, Tetris, Pokemon and, uh, itself, if you choose to roughly believe Wikipedia’s list of best-selling videogame franchises1, the fourth best-selling at least $425 million copies sold.
The game is also multiplatform. Each entry has more or less been released for PC and the major videogame consoles of the time, which actually means the PC, Xbox and PlayStation.
Now, Microsoft could say a bunch of things, but what we can only really hold Microsoft to are incentives that might guide its actions, and even then, it’s not like corporate entities helmed by people make consistent decisions in the first place. So, what might Microsoft do?
This clearly has Sony worried: it’s provided evidence to the UK Competition Markets Authority’s investigation2.
All of this was just preamble and I should say that the last time I think I studied competition law in detail it was probably in university in the late 1990s/early 2000s.
I don’t think this merger should go ahead. Or rather, if it does go ahead, I think something interesting should happen, which to be honest I haven’t fully thought through.
I’ve written about this before, but a thing that’s happening with technology and media is the construction of non-interoperable silos combined with the attempt to build monthly subscription exclusive content platforms, to wit: every single thing that’s happening in premium video streaming: you’ve got Netflix exclusive, HBO exclusives, Disney+ exclusives, Paramount+ exclusives, and so on.
There’s several models going on there, too:
I think this is kind of screwed up and is distorting. I don’t think it leads to lower prices for consumers, which is the overriding principle that U.S. competition law is broadly aimed at. I think in the premium streaming market it probably has led to more choice, but again, that choice presupposes that you’re paying for each/any of the premium streaming platforms, i.e. there’s more premium streaming platforms than before and there’s more content, in aggregate, across those platforms as there’s a rush to compete.
I mean, sure, that’s fine but you’re also paying more, in aggregate, as a consumer. And you don’t necessarily have less expensive choices.
What I’d like to see is some sort of platform-agnostic regulation above a certain size, I think. Again, I haven’t completely thought this through. I think timed exclusives are fine. But curiously, Movies Anywhere (formerly a Disney initiative) exists to allow you to buy films from participating platform retailers and have them available on another retailer’s platform. I can buy something on Google Play and it’ll appear in my iTunes Library, for example.
Only obviously the sticking point for all of this is the negotiating power between the rightsholders of the content and the platform owners who are now also publishers, many of whom are fronting production costs. After all, if they’re paying, they get a say, right?
In the case of Movies Anywhere, this worked because presumably the studio / production rightsholders got together and agreed, out of the goodness of their own hearts, that they wanted interoperability. But crucially not all rightsholders take part and not all studios take part, so you might assume that you can buy any film on Google Play and it will show up on iTunes or wherever, but that’s not the case. You have to read the fine print. You can see that the EU would be spitting blind at this and would want to know why a consumer has to care about reading that kind of fine print.
Which is to say: when we’re in the position that companies with gobs of money and dominance in one area seek to create dominance in another area by tightly integrating content and platform/availability, then maybe we might want to look at how that content is made available. Look, you wouldn’t even need to mess with copyright terms which I would dearly love anyway.
What are some other examples where this might break, though?
Videogames can (but aren’t always!) exclusively developed for a platform. Sony wants PlayStation-exclusive games that show off the PlayStation and induce you to buy one because they do things you can’t do on an Xbox or a PC. Likewise Microsoft. Apple does the same with its operating systems and hardware. So would you force Apple to license iOS and macOS to third parties? If Microsoft were licensing software (my 1990s antitrust memory is fuzzy on this), then would you force those licensing terms to be more even and fairer so it didn’t favour one particular retailer like, uh, Dell? Or, more recently, that its licensing terms might happen to favour its own Azure platform over anyone else seeking to offer Microsoft application cloud services?
So then it gets fuzzy. Multiplatform publishers must stay independent? Nobody’s allowed to publish platform-specific software anymore? Videogames are a distinct market (this is certainly an argument you can make) and if you don’t have platform-specific software then you remove a method of competition between platform holders? I mean, this is a bit like saying sure Disney you can buy Marvel and then invest billions of dollars building up a cinematic franchise but you wouldn’t be allowed to keep Marvel film content as an exclusive on Disney+ as the sole streaming service, and it must be available on other streaming services. All of which is a business consideration for rightsholders who are turning into platform holders anyway: do they go for the money and license out their content to maximize revenue, or do they play a long game and lock it to their platform?
Makes me almost wish I got back into competition law.
I clearly went over 15 minutes again. More like 30 this time.
How are you doing?