There's a lot of confusion around the cloud streaming of video games and how it should be defined.
I have been reading a lot about the CMA decision and the EU decision so I think I know where the confusion comes from.
First, let's define what is cloud streaming in relation to business models:
There are a lot of business models and variations but all can be summed up in two categories that are true today and cover any potential future variations.
- Monetizing streaming services directly (cloud streaming as a service, the revenue stream (market) is selling the service itself).
- Not monetizing cloud streaming services directly (Cloud streaming as a distribution medium, the revenue stream (market) is selling the content in one way or another).
Every existing entity using cloud streaming for game falls into either category 1 or category 2 or both, and the same is true for every actor that could be and the same is true no matter how fancy or unorthodox their monetization scheme is.
However, even if an entity can operate in both categories it's important to note that those are still 2 separate markets or groups of markets.
Just like a console manufacturer is in the console market and a video game developer/publisher is in the video game market. One entity ex: Xbox, Playstation, or Nintendo can do both but that does not make this business models a market of its own, it's just a business model that uses both.
What is the position of the CMA in both categories:
1) The remedy proposed by MS sufficiently addresses all concerns. This is evidenced by the fact the CMA point to other business models as the actual issues and not those offering cloud streaming as a service.
2) No issues have been raised by the CMA or any other authority so there's no concern here, cloud streaming is only a delivery method for content, not the market itself.
Then why the CMA conclusion resulted in a block
For some reason, they tried to cover variations in the cloud market without realizing that any variations that do not monetize cloud streaming services directly are not actually in the cloud market and that any variation that does monetize the streaming service care is covered by MS remedies (at the very least as the one proposed and accepted by the EU).
we can see exactly this paradox at play in the CMA statement "may have entered into a different type of commercial relationship with Activision (eg, through exclusive content, joint marketing arrangements, or a multi-game subscription service like Game Pass)" None of those are part of the cloud streaming market they are just part of the video game content market that may use various delivery method include but not limited to the cloud streaming. It's worth to also note that the CMA themselves found no issue with any actor in those business models that don't use cloud streaming (Steam, epic store, GoG, etc).
As such any MS remedies proposal for those concerns would actually apply to markets where the CMA found no issue like subscription content library or digital store distribution despite being labeled as cloud market remedies.
ex: If the CMA force MS to support digital game stores with cloud services, then what would prevent Epic Store(not found to be at risk of an SLC) from adding cloud streaming and forcing MS to provide ABK content to them?
Then why EU found also concern over the same market?
This is a wrong assessment, the EU found concern over #1 as did the CMA and both actually agree MS remedies resolve all issues in this market. The difference is the EU did not get confused with business models using cloud streaming as a delivery method for their content and correctly attributed those to the overall video game market where they found no issue all things considered.
To some up the CMA conclusion
If you are purely a cloud streaming entity, Microsoft remedies proposal applies adequately.
If you are a content-oriented company (selling content directly or through a subscription to a content library), there is no concern resulting from this merger (no SLC found by any regulation including the CMA).
If you are a content-oriented company (selling content directly or through a subscription to a content library) but then add a cloud streaming delivery option. Then the CMA gets confused into thinking this merger makes you less likely to compete than if you don't propose cloud streaming apparently.
So, the CMA conclusion created a paradox, the CMA did block the merger for concerns over a cloud market that aren't actually cloud market-related concerns and by doing so prevented the benefits of remedies to the actual true cloud market.
This is also evidenced by the fact no actual entity exists today that would benefit from resolutions over the CMA concerns, it's all speculative about how future entities with new models could emerge, they themselves attest to as much but pad themselves by stating the market as a fast-moving nature.
if we take a look at some current entities we can see exactly this (a non-exhaustive list but its enough to make the point)
Boosteroid
they are purely number #1 and 100% covered by remedies
Luna
they are in both #1 and #2, they can benefit from MS remedies by allowing BYOG on their streaming platform
Stadia (if they were not dead)
they are essentially #2 (stadia pro(subscription base content library + digital store) / stadia basic( digital / store))
- But some features of the stadia were locked behind the PRO version
that means they also dip their toe in #1 as part of their cloud streaming offering is also monetized directly so they could benefit from MS remedies by allowing BYOG with no added cost. - Free tier
actually, they could still, MS remedies do not require an actor to a minimum monthly fee for their cloud service sub. This means they could benefit from those even on a free tier, they would just have no way of monetizing said content other than service and store exposure. (which could be enough to justify adding this to a free tier for a limited time)
GeForce now
they are purely in #1 so they benefit directly from remedies.
PS Now
they are in both #1 and #2, they can benefit from MS remedies by allowing BYOG to their streaming platform.
- But PS would refuse if they don't monetize the game directly
yes but
A) The CMA found no SLC for not being able to sell ABK content in a digital store or through a subscription.
B) For Sony in particular, they would actually be covered to do so by other contractual terms proposed by MS.
C) MS cannot be at fault for the business decision of another entity.
In conclusion, CMA Cloud SLC is misplaced for the concern they put forth as those are concerns over video game content where they actually found no SLC. As a result of this misplacement, no remedies from MS could satisfy CMA concerns as they are paradoxical in nature and would require remedies over a non-existent SLC.
Edit: ps. this post is not about evaluating CMA's overall decision or every assumption they made, it's evaluating strictly their definition of the cloud market and their use of the SLC in this context.
Last edited by EpicRandy - on 25 May 2023
