Responses to the CMA Addendum PF
- Microsoft (6 pages)
The Provisional Findings Addendum confirms that Microsoft's incentives in relation to Activision content cannot be extrapolated from past conduct. The recognition that, in fact, Microsoft's past actions were not good evidence of any incentive to foreclose must also mean that the CMA should revisit its incentive analysis in relation to Theory of Harm 2 (cloud game streaming), which is focussed on qualitative evidence. At the same time, this should also cause the CMA to re-assess the current evidence available to it relating to Microsoft's incentives in relation to cloud game streaming.
The qualitative factors on which the CMA relies to question Microsoft's incentives to withhold more generally have been re-assessed and ultimately dismissed. The CMA has not undertaken any comparable exercise quantifying incentives in relation to Theory of Harm 2 as it did for Theory of Harm 1. The absence of that analysis does not somehow make the qualitative evidence in relation to Theory of Harm 2 stronger. Indeed, the absence of any, even broad, profitability analysis to support Theory of Harm 2 further undermines the conclusions. As has been explained to the CMA, [REDACTED].
The qualitative evidence available to the CMA in fact shows that Microsoft has entered into agreements with NVIDIA, Boosteroid and Ubitus, pursuant to which the distribution of Activision content on multiple cloud gaming services is provided for, should the Merger proceed. Not only does this show that Microsoft has no ability to withhold Activision content from rival cloud gaming services (given the presence of legally binding and enforceable agreements with these providers), it is also clear evidence of Microsoft's intention not to withhold Activision content from other cloud gaming services. Any analysis of both Microsoft's ability and incentive should be updated accordingly to reflect this development. Simply put, the CMA has found no incentive to withhold Activision content in relation to console, and the evidence shows it should reach the same conclusion in relation to cloud game streaming.
- Joost Rietveld, Associate Professor of Strategy and Entrepreneurship UCL School of Management, in London (23 pages)
Cloud Gaming Is Not A Distinct Market
A Typology of Cloud Gaming Services and What It Means for Microsoft's Proposed Acquisition of Activision Blizzard
There exists significant ambiguity as to whether cloud gaming should be considered a distinct market or not. The CMA's final decision on whether to block or clear Microsoft's proposed acquisition of Activision Blizzard hinges in large part on this very question. Here, I have put forward the argument that we cannot combine all cloud gaming services into a single, clearly defined market definition. Rather, we can identify four types of gaming services that each use and rely on cloud streaming technology in different ways.
Microsoft's Game Pass offers cloud streaming as a feature; cloud gaming is an ingredient to a much broader value proposition that also includes natively run games as well as other services. Cloud-gaming-as- a-feature services arguably do not compete against cloud-gaming-as-a-complement (e.g., NVIDIA's GeForce Now, Boosteroid) and cloud-gaming-as-an-input services (e.g., Ubitus, GameStream) due to their more specialized offerings and differences in target customers. Microsoft arguably does compete against cloud-gaming-as-a-platform services such as Amazon's Luna and Blacknut—though not so much because they both stream games from the cloud, but rather because they both provide consumer-facing video game distribution platforms to overlapping customer bases.
To date, however, Activision Blizzard has not released any of its internally-developed video games on any of the cloud-gaming-as-a- platform services. Moreover, several cloud-gaming-as-a-platform services have ceased operations as this type of service has generally struggled to gain traction with consumers.
Consumers' willingness-to-pay for standalone cloud gaming services apparently is low and this is perhaps the strongest indication that cloud gaming should not be considered a distinct market: Cloud streaming is a potentially promising distribution method that will very likely continue to be used and relied upon to various extents by different companies with different offerings aimed at a diverse set of customers that can be both end users and business-to- business customers.
It behooves the CMA—and other agencies—to view it as such.
Splitting Sony's into the next post.
Last edited by Ryuu96 - on 06 April 2023
