This Time, Common Sense Prevailed (Premium)

U.S. District Court Judge Jacqueline Scott Corley handed Microsoft a stunning legal victory yesterday. She got almost everything exactly right.

As I’m sure you know, Microsoft announced that it intended to acquire Activision Blizzard in January 2022 for an astonishing $68 billion. If consummated, this deal is its biggest-ever acquisition, far outstripping LinkedIn (2016, $26.2 billion), Nuance (2021, $19.7 billion), Skype (2011, $8.5 billion), ZeniMax Media/Bethesda (2021, $8.1 billion), and GitHub (2018, $7.5 billion). (Because I know so many were fans, Nokia barely rates at “just” $7.2 billion.)

At the time, Microsoft noted that it didn’t expect to close the transaction to acquire Activision Blizzard until the end of its next fiscal year, on June 30, 2023, because it expected heavy regulatory scrutiny. That proved correct, with the U.S. Federal Trade Commission (FTC), UK Competition and Markets Authority (CMA), and EU European Commission all quickly announcing investigations of the deal as expected. And each investigation tellingly dragged into 2023.

But Microsoft also moved quickly, first by addressing the silly worries that Sony voiced about a Microsoft-owned Activision Blizzard making Call of Duty and other key Activision Blizzard titles Xbox exclusives. (Worries we later learned were fabricated: Sony never expected this to happen.) It also explained the genesis of the deal, which occurred in the wake of an explosive Wall Street Journal expose detailing the sexual misconduct problems at Activision Blizzard; the theory here being that Microsoft would be a better steward for Activision Blizzard’s games and employees. (Microsoft, of course, has had its own issues in this area, though the firm has since made important improvements to its discrimination and harassment policies.)

Microsoft’s case for the acquisition has always been strong, as Xbox has been a distant third in the console wars against Sony and Nintendo over its entire 20+ years and four console generations. It has a small presence in PC gaming, and no presence at all in mobile gaming, which is, by far, the biggest part of this market. It is one of the few companies that has invested heavily in cloud gaming---streaming games from its datacenters---but that market isn’t just nascent, it’s almost non-existent and will never replace console, PC, or mobile gaming; Microsoft, tellingly, offers its Xbox Cloud Gaming service only as a perk of its Xbox Game Pass Ultimate subscription, and we now know that most customers only use it trial games before downloading them for a better experience.

More to the point, Microsoft’s competitors already behave more poorly and unfairly. Apple denied Microsoft’s attempts to put Xbox Cloud Gaming in its iPhone and iPad app store because doing so would prevent it from getting a 30 percent vig on every streamed game despite the fact that video streaming services like Netflix do exactly the same thing; Apple, tellingl...