Microsoft Makes Its Case for the Activision Blizzard Acquisition

Microsoft president Brad Smith says that Xbox is a distant third in consoles and has no presence at all in mobile gaming. That, he says, is why regulators should allow the software giant to acquire Activision Blizzard.

“The mobile game industry generates the most revenue and is the fastest-growing, but a significant portion of the revenue goes to Google and Apple through their app-store fees,” Mr. Smith writes in a Wall Street Journal opinion piece. “Acquiring Activision Blizzard would enable Microsoft to compete against these companies through innovation that would benefit consumers.”

It’s not clear how: Apple and Google’s stranglehold on mobile and a bizarre lack of action from regulators allows those firms to behave illegally and, among their many other sins, overcharge developers with in-app fees that often have little or nothing to do with the cost of maintaining their infrastructures.

Microsoft’s Xbox Cloud Gaming is a great example: Apple refuses to let the firm offer this service through its mobile app stores because it wishes to collect a 15-to-30 percent fee on every single game that users stream through the service. But that’s not Microsoft’s business model—it charges a monthly fee for access to all games in the library—and so Apple has shut them out.

“To get subscribers to this service, Microsoft needs a full library of popular games and, as things stand, we simply don’t have enough,” he argues. “That’s where the acquisition comes in. Activision Blizzard comes with popular mobile, PC and console games, including Candy Crush, World of Warcraft, and Call of Duty.

Right. But that still won’t block the Apple and Google stranglehold on mobile.

As for Sony, the “loudest objector” to the deal, Smith says what we already know: Microsoft offered Sony a 10-year contract to make each new Call of Duty release available on PlayStation the same day it comes to Xbox. And he says that Microsoft is somehow “making it legally enforceable by regulators in the U.S., U.K. and European Union.” Taking Call of Duty away from PlayStation, he says, is “economically irrational … it would also be disastrous to the Call of Duty franchise and Xbox itself, alienating millions of gamers.”