Idas Abridged Summary
Relevant markets considered:
A) Game development and publishing (it includes games for all devices, PC games, consoles and mobile) in Brazil and worldwide.
The combined market share of the parties was below the level of 20% in all possible relevant market scenarios examined, indicating that the transaction in question would not, by itself, imply a significant increase in the level of concentration of the game publishing market.
B) Digital game distribution (it includes PC and consoles games) in Brazil and worldwide.
The only scenario in which the market share held by the parties is slightly above the level of 20% is when the PC and console game distribution segmentsare considered as a relevant market on a global scale. Even in this scenario, the majority of the share corresponds to MS, so the share added by ABK is not relevant enough.
C) Game consoles, in Brazil and worldwide.
The sum of market shares held by the parties amounts to a percentage lower than 20% in all of them. Not relevant enough.
D) Online advertising (it includes display advertising and in-game ads), in Brazil only.
The combined market share of the parties in 202 was less than 10% in all scenarios considered in the analysis. Not relevant enough.
E) Merchandising, in Brazil only.
The parties would have a joint market share of only in the national licensing market in 2021, a percentage unable to generate risk to the competition.
Big difference between consoles + PC and mobile. It seems unlikely that the interested consumer in playing the latest AAA releases of the industry consider smartphones and tablets as capable of replacing consoles and PCs as hardware geared towards games. Likewise, casual gamers who prefer fast-paced games would hardly consider PCs and consoles as close replacements for their mobile devices
PCs and consoles, in turn, seem to be perceived as closer competitors. Even Sony, a traditional player in the console segment, has recently started to publish games that were exclusive to the PlayStation for computers.
Important differences between the services offered right now in the market (Gamepass, PS Plus, EA Play, Luna, Ubisoft+, etc). In any case, the unanimous understanding expressed by the consulted companies is that subscription services would not constitute a specific product market. From a consumer perspective, subscription services would be perceived as direct competitors of individually marketed games, and therefore should be considered in the context of a broader market. wide distribution of games
Subscription services are still not very representative in relation to the total revenue generated from the sale of game content, and, according to industry expectations, they should continue to coexist with other payment models. IDG Consulting estimates that, in 2025, subscriptions will represent around 14% of console-related revenues – a increase of only 4 percentage points ("pp") compared to 10% in 2020 –, and 22% when excluding hardware sales.
The eventual inclusion of Activision Blizzard's extensive back catalog on Xbox Game Pass could in fact reduce Microsoft's demand for third-party content for the service, but it doesn't seem likely that the company will stop offering third-party games to its subscribers after the operation. Any decision in this regard would be inconsistent with Microsoft's recent strategy, which has increasingly invested in expanding the offer of games on Game Pass for console and PC users. If Microsoft decided to make the Xbox Game Pass subscription service exclusive to first-party content, it would likely reduce its attractiveness to current and potential consumers and publishers would still have other channels available (PlayStation Store, PS Plus, Nintendo eShop, Xbox Store itself or even physical media games).
The latest Activision Blizzard games are currently not available on any multi-game subscription or cloud gaming subscription services. Microsoft executives have already publicly stated that they intend to bring franchises such as Call of Duty and Diablo to Game Pass if the transaction is approved. In this regard, it is reasonable to assume that the Activision Blizzard catalog will likely not be made available to Game Pass competitors. Despite the relevance of Microsoft's and Activision Blizzard's game portfolios in terms of quantity, quality, variety and popularity, the estimates presented by the parties indicate that their combined share in the game publishing market would be approximately [0-10]% on PCs and [10-20]% on consoles worldwide. Therefore, even post merger there is still a considerable universe of games that could be explored by current and potential Game Pass competitors.
CADE believes that the considerable market share held by Microsoft in all scenarios portrayed is due not only to the quantity and variety of content available on Game Pass, but also to the company's pioneering spirit in offering this type of service.
Despite this, the fact that Microsoft entered the multi-game subscription segment before its competitors in the console market does not translate into a permanent competitive advantage for Game Pass. Both Sony and Nintendo have a vast catalog of exclusive games in their ecosystems, partnerships with several third-party publishers, and a broad base of captive consumers among their console users. In this sense, it is understood that there is still plenty of room for these companies' subscription services to develop in scope and content in the coming years, in order to become increasingly competitive.
In any case, it is interesting to note that, despite the fact that the PlayStation Plus service is only available on PlayStation consoles and has only recently migrated to a multiple-game subscription model similar to Game Pass, Sony still held a higher market share than by Microsoft in 2021.
On PCs Game Pass is currently the only subscription service that offers a library of games from multiple publishers for download. In the current scenario, Microsoft holds a substantial share in the segment, especially in Brazil. However, such a situation would not prevent new players from entering the market. As already noted, Microsoft and Activision Blizzard together represent less than 10% of the PC game publishing market, both globally and nationally. In particular, companies such as Valve and Epic Games, which are relevant game publishers and also operate quite successfully in the digital distribution market, wouldn't have greater difficulties in developing and implementing their own subscription services.
Subscription services with cloud gaming seem to have special potential to transform the structure of the industry over the next few years, as they dispense with the use of dedicated hardware to access state-of-the-art electronic games. In this way, such services can be seen as competitors not only of other subscription services and digital stores that distribute games, but also, to some extent, of console manufacturers.
With regard to cloud gaming services, such as Google Stadia, Amazon Luna and GeForce Now, CADE considers that, in the current scenario, the possible difficulties faced by such services in competition with Game Pass are more related to the (still) low popularity of the game streaming model than to the game content exclusive to Microsoft's service.
Indeed, although many point to the streaming of games via the Internet as the likely future trend of the video game industry, the fact is that consumer adherence to cloud gaming services is still relatively low. Furthermore, expert projections do not seem to indicate that streaming games across multiple devices will be able to supplant the current "device-centric" model prevalent in the industry, based on the use of dedicated gaming hardware , in the near future. According to estimates by Omdia, the share of cloud gaming services in consumer spending on games is expected to increase from 2.1% in 2021 to 6.1% in 2026, a growth that, despite being quite expressive, still seems insufficient to break the current paradigm of the sector.
The technological challenges to the growth of cloud gaming on a global scale and the still low adherence of consumers to the model are possibly factors that motivated Google to close its exclusive game development studios for Stadia in 2021, and they can also have influenced the decision of Microsoft and Sony to stop offering their Xbox Cloud Gaming and PlayStation Now cloud gaming services independently to consumers.
Even if all these difficulties are overcome, CADE does not envisage that the acquisition of Activision Blizzard by Microsoft is an impediment to the development of competitors and the entry of new companies in the segment. Specially when, among the companies that offer cloud gaming services, there are extremely sophisticated players such as Google (responsible for Stadia) and Amazon (responsible for Luna), both global leaders in their respective core businesses and well positioned among the largest companies in the world. If there is interest and incentives, companies like Google and Amazon have more than enough resources to invest in hiring talent, creating their own development studios, in partnerships with successful publishers , or even in the incorporation of large game studios or publishers.
Nevertheless, the challenges imposed on the entry of new providers of subscription services for games and cloud gaming do not seem, in essence, very different from those faced by Microsoft when it launched the first Xbox in 2001, in a console market dominated by Sony and Nintendo; or those faced by Sony at the launch of the first PlayStation in 1994, when the company entered a market divided between Nintendo and SEGA and, shortly afterwards, became the leader in the segment.
It should also be noted that some of the companies consulted during the procedural instruction, such as Sony, Ubisoft and Warner Bros., also presented their own estimates regarding the total size of some of their markets, and the sources indicated by these companies were quite similar (or even identical) to those mentioned by MS/ABK. In this sense, it is noted that the estimates presented by the Parties are based on data and reports from sources perceived as reliable by other relevant players in the video game industry.
ALTERNATIVES TO ABK GAMES
Most of the companies consulted signaled that Activision Blizzard games would face rivalry from similar competitors across all platforms, with Ubisoft having categorically stated that "there is no such video game title that does not have close competition" , as "every publisher and every game competes for available playtime, and no title is alone in its genre of game".
Despite the popularity that Microsoft or Activision Blizzard titles may have among the gaming public, the fact is that there is no indication that the parties have market power in the electronic game publishing segment, nor that the transaction could create or strengthen a dominant position on the market in question.
The evolution shown in the tables and graphs presented shows that, although Microsoft has a relevant market share , [30-40]% worldwide, its share is still lower than that of the leader Sony, which accounts for [50-60]% of the global market. Also noteworthy is the fact that, concomitantly with the growth of Nintendo's share in this segment in recent years, Microsoft lost a significant portion of its market share. Indeed, while Nintendo's worldwide market share has increased from [0-10]% in 2017 to [10-20]% in 2021 in Brazil, the Microsoft's share dropped from [40-50]% to [30-40 ]% in the same period.
Microsoft does not hold a dominant position in the downstream markets relating to the distribution of games to such devices.
As popular and commercially successful as Activision Blizzard and Microsoft games may be, both Parties' 2021 sales represented a combined share of approximately [10-20]% in the worldwide gaming market publishing games for consoles. It can be seen that almost [90-100]% of the total revenue generated from the activity of publishing games for consoles in 2021, worldwide, does not refer to the content of MS and ABK. So, if Microsoft chose to market only first-party content on the Xbox Store or to market third-party content under less favorable conditions, this would likely imply a drastic reduction in the quantity and variety of games available for Xbox, reducing the attractiveness of the console and its ecosystem to consumers.
With the acquisition of a publisher such as Activision Blizzard, and considering the (theoretical) risk of the company's content becoming exclusive to Xbox, it is likely that the eventual conclusion of the transaction will give Microsoft a considerable competitive advantage in the segment of consoles. Even so, CADE does not see that such an advantage represents a risk of closing this market for current competitors. Nintendo does not currently rely on any content from Activision Blizzard to compete in the market. In turn, Sony has several predicates - strength of the world's leading brand for more than 20 years, extensive experience in the sector, largest user base, largest installed base of consoles, robust catalog of exclusive games, partnerships with multiple publishers, third-party, brand loyal consumers, etc. – which should contribute to maintaining the competitiveness of PlayStation in a possible post-operation scenario, even in the face of possible loss of access to Activision Blizzard content.
Microsoft is the leading company in the segment of operating systems for PCs. In this context, it is worth questioning whether the company could not prevent the access of computers equipped with OS competitors of Microsoft Windows (Apple or Google), impacting competition in the PC market.
To investigate this possibility, SG consulted the Battle.net catalog in order to check if the company's titles would be compatible with OS other than Windows. Only WoW, some Call of Duty and Diablo are available on Mac. Therefore, the main Activision Blizzard games today were already being released exclusively for PCs that run on Windows, even before the proposed acquisition by Microsoft. Thus, there are no indications that the completion of the transaction may imply any relevant impact on the current dynamics of competition in the PC and operating systems segments.
The absence of Call of Duty in recent years, however, did not prevent Steam from occupying a leading position in the ranking of digital stores, especially among Brazilian consumers. Valve held a market share of [40-50 ]% in the national market for digital distribution of PC games in 2021. Other competitors do not depend on Activision Blizzard content to operate in the market, since they do not sell the company's games as a relevant part of their business. Competition between digital PC game stores would not be significantly affected if Microsoft were to centralize the distribution of Activision Blizzard content in its ecosystem, since Activision Blizzard itself already concentrated marketing their most important games on Battle.net.
The relevance of Activision Blizzard games to the Nintendo Switch and Nintendo eShop is minimal, so their eventual withdrawal from this ecosystem would likely not have any significant impact on Nintendo's game distribution business.
As for Sony, in light of the elements available in the records, there is no evidence that Activision Blizzard games actually represent an indispensable asset for Sony's competitive performance in the digital distribution market. Sony reported that in the year 2021, Activision Blizzard accounted for REDACTED of total consumer spending on games and add-ons. Such percentages, although they are quite expressive, do not seem to reflect values whose loss could effectively limit the ability of the leading company in the console market to compete in the digital distribution segment, and are certainly not sufficiently representative to the point of, by themselves, characterize Activision Blizzard content as an "essential input" to Sony's business.
Although it is recognized that an eventual exclusivity over the distribution of Activision Blizzard's content may give Microsoft a competitive advantage, there is no evidence that such an advantage can harm the performance of third parties to the point of limit competition in the market for digital distribution of games.
Call of Duty
The information presented seems to corroborate the allegations made by some of the players consulted by SG/Cade throughout the process, who cited the Call of Duty franchise as Activision Blizzard's most important asset in the video game market for PC and consoles. So important that, in Sony's understanding, such a franchise could stand out "as a category of games in itself".
No less than 10 of the 20 best-selling games in the US in the last decade are Call of Duty, with 7 titles in the franchise among the top 10.
Despite the undeniable popularity of Call of Duty , the series' dominance in the best-selling video game list is not, in itself, an indication that Activision Blizzard holds a dominant position in the game publishing market. In 2021, as already seen, the company's games catalog earned it, worldwide, a market share of [0-10]% in the PC games segment and of [0-10] % in console games – percentages that, although they are quite expressive when compared to the shares held by most competitors, seem insufficient to give Activision Blizzard a leadership position. In Brazil, the company's share in the game publishing market is even less representative.
It should also be noted that it is not only in Brazil and other Latin American countries that Call of Duty seems to be less popular and relevant than in the United States, but also in the Japanese market.
It is possible to observe that the Activision Blizzard catalog, and in particular the Call of Duty series , are very important assets in the general context of the video game industry. Nevertheless, from the perspective of the Brazilian consumer, Call of Duty represents one among several highly successful game franchises, while Activision Blizzard, although it is among the largest publishers of games for consoles in the national scenario, is not the most relevant among them.
It is also necessary to consider that, as Call of Duty is an "essential" game, as defended by Sony, then the Nintendo Switch would probably not be able to compete effectively in the market, since no title in the franchise was released for the platform (until now). What can be observed, however, is that the Nintendo console has been showing a good sales performance since its launch in 2017, having even surpassed the numbers of the recently launched PlayStation 5 and Xbox Series X|S in 2021.
It is important to bear in mind that the game development and publishing market is quite dispersed and open to innovation, and that consumer tastes and preferences can vary significantly over time. That said, a video game does not necessarily need to have a multi-million budget to obtain recognition and commercial success. It should be noted that the initial version of Minecraft, usually referred to as the best-selling game of all time, was created and published independently by a single developer.
Considering the huge popularity of Call of Duty , it is reasonable to infer that if Activision Blizzard games were no longer available on Sony consoles, PlayStation users could decide to migrate to Xbox, or even a PC, to continue having access to franchise games. On the other hand, it's also reasonable to assume that if upcoming Call of Duty games became exclusive to the Microsoft ecosystem, players loyal to the PlayStation brand could simply abandon the series, migrating their demand to other games available on their favorite console.
CADE believes that the fact that Call of Duty has traditionally been a cross-platform game series has a significant influence on the number of users and the sales performance of the franchise. Given this context, it is likely that, at least in the short term, Call of Duty would lose a significant amount of revenue and players if its games were no longer offered to users of the most popular console in the world. In fact, such a hypothetical scenario could not only negatively impact the franchise's numbers, but also favor other multiplatform games similar to Call of Duty that remain on PlayStation, such as competing series such as Battlefield (EA) and Tom Clancy's Rainbow Six (Ubisoft).