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Ryuu96 on 21 March 2023
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Microsoft’s Supplemental Response to the Notice of Possible Remedies

Cloud Gaming Remedy

In response to the Panel's questions, Microsoft has significantly expanded access to the Eligible Games. The proposed remedy is now a royalty-free worldwide license which is generally available to consumers and cloud gaming providers. The streaming right granted to consumers in respect of the Eligible Games is, therefore, "portable" in the sense that it can be used to access the game which the consumer has acquired on any Eligible Streaming Service (or more than one Eligible Streaming Service).

Games Covered by the Proposed Remedy

The remedy will apply to the Activision titles for PC and associated content listed in the updated table below, including all past, current and future releases of such titles available on PC ("Eligible Games"). The list of Eligible Games includes [] Activision PC games [].

~10 Titles List~ Redacted.

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At the Remedies Hearing the CMA asked Microsoft if the 10-year duration is sufficient and whether there would be a "cliff edge" for Sony at the end of this period. The 10- year period is []. Microsoft considers that a period of 10 years is sufficient for Sony, as a leading publisher and console platform, to develop alternatives to CoD.28 The 10- year term will extend into the next console generation []. Moreover, the practical effect of the remedy will go beyond the 10-year period, since games downloaded in the final year of the remedy can continue to be played for the lifetime of that console (and beyond, with backwards compatibility).

2.13 CoD is an entertainment franchise which is already nearly 20 years old. [], Microsoft will need to secure the broadest distribution of the franchise and will be heavily incentivized to keep it on the PlayStation platform []. Microsoft considers that having maintained CoD on PlayStation and grown its player base on Nintendo, GeForce Now and other cloud gaming platforms for a decade, it will have no incentive, or indeed ability, to take CoD exclusive.

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At the Remedies Hearing the CMA asked Microsoft if it would be willing to extend the proposed console licensing remedy to any "credible entrant" in the console market.

2.18 Microsoft does not consider that this is necessary in order to remedy, mitigate or prevent the Console SLC identified in the Provisional Findings, which does not relate to a hypothetical withholding of CoD from potential new entrants. Rather, the Provisional Findings focus specifically on the potential impact of the Merger on Sony. In particular, the Provisional Findings conclude that CoD is an important input for Sony PlayStation. The CMA has not, however, found or presented evidence to suggest that CoD is an important input for console providers generally.

2.19 Nor could the CMA reach such a conclusion, given that CoD is not available on Nintendo – the second largest provider of consoles – today. As the Provisional Findings acknowledge, console platforms offer different technical specifications and differentiated gaming propositions.34 Nintendo's success demonstrates conclusively that a console platform's ability to compete effectively is not dependent on the ability to offer CoD to its customers. Rather, this is possible with a "differentiated offer".35 In any event, Microsoft has already reached an agreement to bring CoD to the Nintendo platform for 10 years as part of its strategy to make CoD as widely available as possible.

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At the Remedies Hearing the CMA asked how the parity framework would allow Microsoft to accommodate advanced, PlayStation-specific features in CoD which are not available on Xbox.

The Parties note, in particular, that there is no basis in the Provisional Findings for what would essentially amount to a "beyond parity" obligation, requiring Microsoft to develop a PlayStation version of CoD which has more features than the Xbox version. Rather, the relevant partial foreclosure mechanisms considered in the Provisional Findings, which the remedy is designed to address, relate to releasing a worse version of CoD titles on PlayStation consoles for example "with fewer features" and "degrading the graphical quality" of the PlayStation version.56

The concern provisionally identified is that Sony would be a "substantially less effective competitor than it would be absent the Merger".57

2.37 As Microsoft will be shipping CoD on PlayStation in compliance with its remedy commitments [], Microsoft will have every incentive to develop games with optimised support for PS5 features, such as haptics, and future consoles in order to maximise sales on the platform.

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2.21 The fact that Microsoft has entered into agreements with Nintendo and NVIDIA in relation to CoD and has made its content (including Game Pass) available on new handheld console devices, such as Steam Deck and Razer Edge, is evidence that Microsoft has a clear incentive to provide CoD to new consoles. The CMA's assessment of incentives in the Provisional Findings cannot be relied upon to conclude that Microsoft would be incentivised to withhold CoD from any such entrant.39 The potential benefits of any hypothetical withholding strategy to Microsoft would be even further reduced if the CMA accepts Microsoft's proposed licensing remedies.40

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At the Remedies Hearing the CMA asked Microsoft whether developing games for future new versions of PlayStation might raise concerns in terms of Microsoft having access to Sony's confidential information.

2.55 As explained at the Remedies Hearing, Microsoft already successfully navigates these confidentiality issues today as a developer for PlayStation, notably in relation to the Minecraft franchise, as well as, post-acquisition of ZeniMax, Sony exclusives Deathloop and Ghostwire: Tokyo.

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