Pushback (Premium)

With the UK Competition and Markets Authority CMA unexpectedly pushing back against Microsoft’s admittedly concession-free “material changes” in its Activision Blizzard acquisition, the software giant, finally, has blinked. And it is now offering a completely pointless concession that, go figure, meets the needs of the CMA.

And you thought we were done here.

Granted, I thought we were done here. And that what the CMA was engaging in was simply a mulligan, a do-over of its terrible and thoughtless initial decision to block Microsoft’s acquisition of Activision Blizzard. I referred to it, endlessly, as “regulatory theater,” the theory being that the CMA knew it was wrong and was simply taking enough time to make it seem like it was busy considering Microsoft’s new “evidence” so that it could rubber-stamp the deal it should have agreed to several months ago.

But that’s not what happened. Instead, the CMA reviewed Microsoft’s new “evidence” and came away with exactly the same issues that triggered its block in the first place: this pointless and utterly clueless regulatory body is still concerned with the invented market for streaming video games, a market that does not exist today and will not be a force of any kind in the foreseeable future if ever.

In response, Microsoft has made actual “material changes” to the structure of its acquisition, at least from the CMA’s perspective (hopefully): it has signed an agreement with Ubisoft that gives that game publisher cloud streaming rights to “the complete slate of current Activision Blizzard games, as well as all their new titles launching in the 15 years” via Ubisoft+. But not just any version of Ubisoft+: the base subscription costs $14.99 but is PC-only. You will need the more expensive $17.99/month plan offering, which offers some games via Xbox consoles and Amazon Luna. Anyway, Ubisoft says that it will announce more about how and when Activision Blizzard titles will be added to Ubisoft+ and other cloud gaming platforms in the future.

So this raises two fairly obvious questions. How does this deal address the CMA’s concerns? And what does this mean to Xbox gamers, many of which are already paying $9.99 to $14.99 per month (with prices set to go up soon) for some version of Xbox Game Pass?

Let me address that second one first, because it’s straightforward: It doesn’t impact Xbox gamers (almost) at all. The Ubisoft deal addresses only cloud gaming (streaming) and not the availability of Activision Blizzard games via Game Pass (in which the games must be downloaded to be played). This is not an issue because no volume of customers is actually using Xbox Cloud Gaming, which is a perk of only the most expensive Game Pass subscription, to play games. More to the point, Activision’s biggest games, like Call of Duty, will not perform well over streaming anyway. (In fact, I believe COD multiplayer gaming is essentially is impossible via streaming.) So this is not a major concession for the people who matter here, gamers. (And in an intentionally ironic twist, Xbox Cloud Gaming customers in the EU will get access to AB games in that market because the European Commission did approve the acquisition.)

But the CMA. Now, that one is curious.

We don’t know exactly what the CMA told Microsoft. What we know is that Microsoft submitted its list of new “evidence” in late July, that the regulatory body took over two weeks to evaluate the information, and that it found it lacking. We know it was related to cloud gaming, that most curious of concerns, because Microsoft came back to the CMA with a structural change that the CMA apparently thinks will work. And you can see that in the language it uses to communicate this change.

“The new deal follows confirmation by the Competition and Markets Authority (CMA) that the original deal would be blocked to protect innovation and choice in cloud gaming,” the agency writes in its latest missive. “Microsoft and Activision have [to] agreed a new, restructured deal, which has been submitted to the CMA to review in a new investigation … Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years (this excludes the European Economic Area). Instead, these rights will be divested to Ubisoft prior to Microsoft’s acquisition of Activision.”

(By the way, Ubisoft will compensate Microsoft for this, via a “one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage.”)

But here’s the important bit: “Microsoft has stated that the restructured deal is intended to address the concerns set out in the CMA’s Final Report in April. In particular, the transaction is intended to provide an independent third-party content supplier, Ubisoft, with the ability to supply Activision’s gaming content to all cloud gaming service providers (including to Microsoft itself). Ubisoft will be able to license out Activision’s content under different business models, including subscription services. The deal also proposes that Ubisoft would have the ability to require Microsoft to provide versions of games on operating systems other than Windows.”

CMA CEO Sarah Cardell says that her agency will “carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments,” ]virtually all of which have long been in support of the acquisition] … any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

Yes. The CMA remains as pointless as ever. Likewise, what I wrote back in July remains as true as ever.

“The CMA posits an imaginary future in which cloud-streamed gaming somehow becomes a major market unto itself. And in the context of this fever dream that Microsoft, an also-ran in the video game market today, might somehow commit future crimes like those in the book and movie Minority Report as part of a dastardly plot to dominate a business in which it has never been successful or profitable.”

So, congratulations to the CMA. You have delayed this acquisition yet again, this time until October, as an anxious world awaits the ruling from a regulatory body so inept that it could appear in a Pink Panther movie. Speaking of which, you have done so in order to … what? Give a French video game publisher—right, Ubisoft isn’t even from the UK—the right to pay Microsoft to stream Activision Blizzard games. For some reason.

Classic.