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Forums - Gaming Discussion - Cloud Streaming: Market or Distribution Method, CMA Right or Wrong

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.

  1. Monetizing streaming services directly (cloud streaming as a service, the revenue stream (market) is selling the service itself).
  2. 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

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The CAT released a summary of MS appeal.

1 claim in particular exactly address the situation I described in the OP :


 In its market definition analysis, the Respondent failed to consider potential switching to native gaming, resulting in a flawed conclusion that cloud gaming services fall in a separate product market

In other words, any future entity would have the ability to switch at will to pure native distribution making all remedies that do not pertain to address specifically Cloud service themselves (to the benefits of entities that monetize the service directly) remedies that actually apply to other markets and thus are not actually about the Cloud.



I expect naught but rational reasoned discourse in this topic.

I think the question itself shows how difficult this is. Think about what the word market, in its most basic non-technical sense means. A market would be a place where merchants and customers exchange goods. In other words, a place of distribution.

Obviously those are not technical terms, but it shows how these two concepts are closely intertwined. A market is at its core all about distribution. So, the line between distribution method and market seems intrinsically very blurry to me.

Colloquially, it has been common to say things like "the used games market", the "home video market", "the rental market", etc. Radio stations and CD stores were both distribution methods but they wouldn't generally be thought of as the same market. I'm pretty sure you could find countless posts on this forum talking about the handheld market, or the mobile games market, etc.

Cloud streaming of gaming is a particularly close case, because if you imagine latency was not a thing, the differences would be almost non-existent between a purchasing a digital copy of a game vs a cloud version of a game. Lag changes things, but whether it's to the point where they shouldn't be considered the same market, I dunno.

My inclination based on zero technical expertise is that I would classify it as its own market. But I think reasonable minds could differ. My question about the decision is more on why the Activision deal would lead to a monopoly in this market.



I think the most practical way to look at this is whether or not services like Netflix are their own market. Which I believe that the FTC does.

The issue I have is that western society (particularly America) continues to perpetuate huge growth for these gigantic corporations and it ends up affecting us in the end. Industry consolidation and oligopolistic markets have amplified over time. Beer, groceries, e-commerce, physical retail, music recording industry, TV/film, airlines, etc...we have seen this time and time again. The problem with the way we have been regulating companies is we basically have to predict the future. This has had detrimental effects in the market, not from a business standpoint but a consumer one, as a result of oligopolies. There are a variety of studies which have shown this effect.

But we can't prove that MS will cause an issue in a relatively new market, so it will probably go through. If it happens that it does have a negative effect on the market, the decision can't simply be reversed. In addition, allowing MS to do this reinforces further consolidation by other companies. Maybe MS buys Activision, so Amazon buys EA (which they are looking to do), and Google buys Ubisoft. Does it sound like a snowball argument, absolutely, but we have historical precedent gathered from a huge amount of other markets to show that this thought process isn't unreasonable.



JWeinCom said:

I expect naught but rational reasoned discourse in this topic.

I think the question itself shows how difficult this is. Think about what the word market, in its most basic non-technical sense means. A market would be a place where merchants and customers exchange goods. In other words, a place of distribution.

Obviously those are not technical terms, but it shows how these two concepts are closely intertwined. A market is at its core all about distribution. So, the line between distribution method and market seems intrinsically very blurry to me.

Colloquially, it has been common to say things like "the used games market", the "home video market", "the rental market", etc. Radio stations and CD stores were both distribution methods but they wouldn't generally be thought of as the same market. I'm pretty sure you could find countless posts on this forum talking about the handheld market, or the mobile games market, etc.

Cloud streaming of gaming is a particularly close case, because if you imagine latency was not a thing, the differences would be almost non-existent between a purchasing a digital copy of a game vs a cloud version of a game. Lag changes things, but whether it's to the point where they shouldn't be considered the same market, I dunno.

My inclination based on zero technical expertise is that I would classify it as its own market. But I think reasonable minds could differ. My question about the decision is more on why the Activision deal would lead to a monopoly in this market.

There are 2 definitions associated with Market. https://www.google.ca/search?q=market+definition
The first one is like you stated or to use exact wording:
a regular gathering of people for the purchase and sale of provisions, livestock, and other commodities.
"farmers going to market"
an open space or covered building where vendors convene to sell their goods.

I think the definition that better fits the context of regulation would be the other one thought :
an area or arena in which commercial dealings are conducted.
"the labor market"
a demand for a particular commodity or service.

This definition allows for a more granular take on markets like the 'avocado market'.
In this definition, I think it is implied that the name of the defined market pertains to the actual product or service being monetized in some way.

With that in mind, yes there is a cloud market for sure and my op attests to this much (point number 1). But it really is important to distinguish entity that evolved in the cloud market by monetizing the service (Nvidia, Boosteroid ...) and other that does not. The difference is if you monetize it, it is what is bringing in revenue, it is what you have the incentive to innovate in, and it is the incentive you use to attract customers. Whereas if you don't monetize the service then you have other things that bring revenue like a digital or a multi-game subscription service. In this business model, your store or subs is what you want to expand, it is what provides customers the incentive to purchase. The unmonetized streaming feature then is only a selling point to your store/subs which are your actual market. A distribution method to which an exclusive use is entirely dependent on business decisions and not a result of requirements by the content being sold.

Now of course those are only examples to illustrate both ends of a spectrum. In reality, there is everything in-between as an entity can mix both to various degrees. However a business model mixing 2 market does not create a 3rd different one, it is only a model that use both existing one.

This is where I think the CMA definition have some issue. I have no problem with their concern over the cloud market however expanding the definition to cover "other business models" makes their definition reach outside the actual boundaries of the cloud market by including business operations that are evolving in other markets.

The CMA found no issue with digital stores, likewise, they found no issue with multi-game subscription providers. But by their definition, they have an issue if an actor does or adds a cloud streaming feature. There's a paradox here. The CMA has taken issue because the remedies MS proposed only catered to BYOG business as they would have wanted to also support cloud providers with multi-game subscription models and others but again they found no issue with said business models if they don't propose a cloud feature.

This paradox makes it impossible for MS to propose actual remedies without having them address other markets outside the scope of the actual cloud market. In other words, by wanting MS to propose remedies to cloud providers with multi-game subscription services they are not actually benefiting the cloud aspect of those providers but the multi-game subscription one.

Let's say as a thought experiment, that the CMA did succeed and made MS commit to remedies for every business model of cloud providers there can be. What would prevent Epic Store, an actor judged not at risk by the CMA, to add a cloud streaming feature and claim the benefits of MS remedies? Likewise, if the CMA succeeded in forcing MS to license ABK titles to an actual cloud provider with a multi-game subscription service like Luna, what prevent Amazon from dropping Cloud streaming feature afterward or adding a download and install feature?

Now if we take the accepted remedies by the EU. We can see that it does not feature such a paradoxical interpretation. The concern where limited to the cloud market and so is the remedy. Any entity that monetizes its cloud service (has the incentive to add value to the service itself) can make use of and benefit from the remedy proposal free of charge.

So in summary, cloud streaming can be both a market and a simple distribution method, it all depends on what is being monetized. CMA concerns though were requiring MS to address concerns over the Cloud market by encompassing also entities that do not necessarily monetize such services by supporting models that can be majoritarily attributed to other markets.

Last edited by EpicRandy - on 29 May 2023

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Doctor_MG said:

I think the most practical way to look at this is whether or not services like Netflix are their own market. Which I believe that the FTC does.

The issue I have is that western society (particularly America) continues to perpetuate huge growth for these gigantic corporations and it ends up affecting us in the end. Industry consolidation and oligopolistic markets have amplified over time. Beer, groceries, e-commerce, physical retail, music recording industry, TV/film, airlines, etc...we have seen this time and time again. The problem with the way we have been regulating companies is we basically have to predict the future. This has had detrimental effects in the market, not from a business standpoint but a consumer one, as a result of oligopolies. There are a variety of studies which have shown this effect.

But we can't prove that MS will cause an issue in a relatively new market, so it will probably go through. If it happens that it does have a negative effect on the market, the decision can't simply be reversed. In addition, allowing MS to do this reinforces further consolidation by other companies. Maybe MS buys Activision, so Amazon buys EA (which they are looking to do), and Google buys Ubisoft. Does it sound like a snowball argument, absolutely, but we have historical precedent gathered from a huge amount of other markets to show that this thought process isn't unreasonable.

I think the best solution to the issues you describe thought would be to better equip regulators in case of actual antitrust. Mergers provide an opportunity to act in prevention and it is fine when issues raised cater to the highly probable scenarios and/or protect actual and current competition instead of hypothetical future ones. Absent of those regulators should not act as if there is no tool at their disposal to act in remediation would an issue arise either.

As for other entities reacting to a merger by trying to do one of their own, I have no issue with this possibility. Sure it is possible that as a result of some of those deals, some titles might become less available to me and or that some of the merged entity focus shifts to something I like less but the contrary is also quite possible, and mergers like these are a sign that potential huge investment and expansion are looming.

Last edited by EpicRandy - on 28 May 2023