Xbox |OT|

[Ryuu96]

Some highlights and a few comments from the administrative complaint from the FTC:

- First relevant market: high-performance video game consoles, only Sony and MS are competitors there.

- The FTC differentiates between general purpose PCs and high-performance gaming PCs, although both can be used to play games.

- ABK is one of the few independent companies capable of developing "standout video games" for those consoles.

- The other two relevant markets are multi-game content library subscription services and cloud gaming.

- Total gaming revenues for MS in FY2022 were over $16 billion (Is this new?).

- "Nintendo's most recent console—the Nintendo Switch—is not a ninth-generation gaming console". The FTC put an end to the debate :s xD

- The FTC says that there are only 4 AAA independent games publishers: Activision, Electronic Arts, Take-Two, and Ubisoft (Japanese publishers are fair game, then?) 

- Epic would be one of the few other studios capable of releasing AAA games, something that industry participants refer to as the "Big 4 + Epic." (Is that true? I've never heard that).

- AAA games increase adoption and engagement, giving a console or subscription service greater leverage in attracting additional content from publishers and developers (It sounds like the video game industry is all about AAA games, nothing else).

- "Nintendo pursues a different strategy of integrating its lower performance, portable hardware with its own distinctive first-party games to appeal to player nostalgia for Nintendo's unique gaming experience over high resolution, life-like graphics, and performance speed". (Nostalgic children?)

- Although the FTC talks about high performance PCs for gaming, later they say that gaming PCs and mobile devices are not commercially reasonable alternatives to High-Performance Consoles.

- Microsoft is already the market leader of multi-game content library subscription services in the US (although we don't know exactly why or how: in fact, some tiers of PS+ are initially mentioned as comparable to Gamepass but then there is not mention of them in the section about subscription services).

- Buy-to-play games are not commercially reasonable alternatives to subscription services. Therefore, they are different markets.

- Xbox Live Gold, PlayStation Plus Essential or Apple Arcade aren't alternatives to subscription services, either.

A few hot takes:

- I’m 50-50 on the deal going through or not and the CMA will kill it or save it.

- There are so many assumptions and so little evidence in the complaint... It fits the theories of Khan these last 4-5 years, but as a lawyer I’m not used to this, I need more substance xD

- The issues are really, really similar to the ones from the CMA after Phase 1 (that’s why I think that the CMA will save or kill the merger).

- Everything is defined in such a narrow way. I mean, only 4 publishers and Epic can create AAA games? And what happens with the thousands of games developed by indies, some of them very successful?

- Nintendo sells millions of games and consoles but is considered as their own market, not a competitor in any case.

- Regarding the Zenimax acquisition, I think that the EC said that even if MS decided to make all the content exclusive, their games weren’t "good enough" to create a problem. I’ll check again the decision, but I’m not sure why there is so much focus about that (besides the statements from MS or that making something exclusive is not anticompetitive per se).

- The CMA put way more effort defining subscription services and specially cloud gaming as their own markets. Here lots of arguments feel undercooked.

In this first reading the complaint feels weak to me, but the timing is not in favor of MS. If they can get the CMA (even with concessions), I think that they will renegotiate the merger agreement. But if they don’t, I think that they will pull out of the deal before the second extension (April 18th 2023).

Tomorrow I’ll share more!

Source: Idas.