Matt, could you sometime put together an article that deal with the notion that "It's my/our company and if we want to sell it and we can find a buyer, why shouldn't that be our right?" Even hostile takeovers seem "hostile" only to the point that the buyer finally finds the right price.
And a second point. While we say that we favor free markets, corporations understand that a monopoly position is good for them, and free markets be damned. (I think) we know that free markets lead to more industry innovation than does monopoly, but competition requires nimbleness, and I am not sure enough managers of today have this nimbleness
There’s a legit threat to democratic governance when only a few firms control a market instead of dozens or hundreds. FB, Google and Amazon can spend hundreds of millions on lobbying since they don’t have to spend that on innovation or beating competitors
This is great, thanks. I'm more worried about Microsoft rolling up the software development space than anything else, but this acquisition is ludicrous. This also feeds their id management & tracking systems. I shudder to think how that fits with AB's honestly pretty predatory games (microtransactions, loot boxes, etc).
It's not just the console space either. PC gaming has had launcher battles for decades, all trying to see who you are & what you're playing, make sure you're playing "legitimate" games, and of course serving ads. Microsoft doesn't have to participate in that as long as it can force that windows xbox service, and every acquisition makes it more tolerated.
2) Yes, Microsoft market cap is much larger than Sony (my, how much Sony has fallen), but right now, Microsoft is estimated the number 3 console, behind well Nintendo (which has a lot more adult fair then you think) and still far behind Sony. Sony has tons of contractual exclusives and captive studios, far more than Microsoft. Not that it forgives Microsoft, but Sony is generally the worse actor here.
3) I think there is grassroots support for the merger in the gaming industry due to how much folks love some Activision-Blizzard games, but hate what has happened to the company, with employees treated horribly, and lots of greedy money grubbing behavior. Activision-Blizzard needs some "Adult Supervision", and maybe Microsoft could give it to them? is the feeling I see. Which basically means a merger, so Microsoft is the least worst option?
I'd rather we can go after Sony for anti-competitive behavior, and clean up A-B with pressure from Wall Street and customers, and keep A-B as an independent company, but honestly, does anyone think that will happen?
"If regulators fail to require terms, how can you blame a company for not following them?"
Microsoft assured the EU they wouldn't do what they then did. It's true that the EU Competition Authority was stupid enough to believe them, it's also true Microsoft lied. Regardless, consent decrees don't work - Live Nation-Ticketmaster had a consent decree that wasn't worth the paper it was printed on.
"Yes, Microsoft market cap is much larger than Sony (my, how much Sony has fallen), but right now, Microsoft is estimated the number 3 console, behind well Nintendo (which has a lot more adult fair then you think) and still far behind Sony. Sony has tons of contractual exclusives and captive studios, far more than Microsoft. Not that it forgives Microsoft, but Sony is generally the worse actor here."
Sony has to make money in gaming, Microsoft does not. Two wrongs don't make a right.
"I think there is grassroots support for the merger in the gaming industry due to how much folks love some Activision-Blizzard games, but hate what has happened to the company, with employees treated horribly, and lots of greedy money grubbing behavior. Activision-Blizzard needs some "Adult Supervision", and maybe Microsoft could give it to them? is the feeling I see. Which basically means a merger, so Microsoft is the least worst option?"
I think that's a reasonable point, but it doesn't mean that the merger is legal. It just means Activision is poorly run.
"I'd rather we can go after Sony for anti-competitive behavior, and clean up A-B with pressure from Wall Street and customers, and keep A-B as an independent company, but honestly, does anyone think that will happen?"
1) This is not necessarily true. In a separate document sent to the EU, MS said that their incentives to make Zenimax games exclusive relies on money recouped via extra Xbox sales and resulting software spend, and said it was implausible. The EU did recognise that Xbox could make Zenimax games exclusive, but I believe the FTC is saying MSFT did not act in good faith. It proposed it was implausible and then months later made all future games exclusive. You can see why regulators now doubt MS on ATVI.
2) Contract competition is how markets work. MS and Sony both compete for the same contracts and MS has many contract exclusives as well, such as Ark 2, PUBG, Roblox, Naraka, Warhammer etc. This is entirely different to owning the biggest third party IP in perpetuity and setting the terms for your competitors. Your comment at Sony makes little sense. MS has spent $80B+ in buying publishers, including two mega publishers, Bethesda and ATVI. Sony has spent ~$5B at best and no mega publisher has been bought.
3) MS just attempted to cancel Xbox Gold subs and double the price of access to online for Xbox players. The pushback was so severe that they had to reverse that decision in days. MS isn't any better than ATVI at money-grubbing and once again this does not excuse anti-competitive behaviour.
I like that blog, but it's a bad faith and inaccurate characterization of the case. First of all, to argue that the case is 'politically motivated' without any evidence reflects anger, not analysis. The FTC staff does not recommend challenges based on legally meritless arguments.
In terms of his point about the EU, that's just wrong. Microsoft declared to the EU that their strategy was not to withhold games from rival consoles. They they did. The reason the EU didn't require a commitment not to do that is because their own economists believed it would be irrational for Microsoft to make Bethesda games exclusive to the Xbox. No commitment needed. Yes that was dumb. But economists don't understand markets.
See (122) "Furthermore, the Commission notes that the above considerations are consistent with the Notifying Party’s declared strategy in relation to the Transaction. [Microsoft’s future strategy regarding ZeniMax games]
It's very irritating this has even become an argument. The FTC is merely citing from the EU Commission's comments in noting MS claimed they did not have an incentive to make games exclusive, then immediately did so.
Now MS has latched onto this silly idea and are stating the FTC has the facts wrong, which is just in fact plain ignoring what the FTC complaint says.
FOSS has gotten really personal about this case (sound like he had history with A-B), and is a bit less balanced here.
Reading the EU case, I'm amused it completely seems to miss PC gaming. The reason why the analysis is wrong (and Microsoft did exclusives) is that the markets for Xbox + PC Sales + PC/Xbox game pass sales is larger than just the minority position of Xbox in the console market, and several of the recently announced exclusives are of game genres that historically do well on PC. So it is not Xbox exclusive, but it is Microsoft exclusive.
Also, Microsoft made public statements pre-merger that conflicted with (122). That's an interesting miss by the commission.
Do not believe that blog. Florian is a paid shill to Microsoft and in the past Oracle as well. H was caught out as many outlets referred to him as an independent, when in the courts it came out he was being paid by Oracle. Many outlets since then no longer refer to him.
Lessening competition creates more A-B scenarios. The government’s job is to create or at least maintain competition in markets. It’s virtually the only way to keep company behavior in check. That and increasing company transparency (that reveals, for instance, bad behavior.)
1. Isn't most gaming revenue derived from new releases? Having a back catalogue of games is very different from having a back catalogue of movies or music. Its the new content that sells here.
2. I don't believe Sony is really the main competition focus here.. Microsoft's eye is on the ultimate prize of cloud gaming, where Sony does not stand a chance. If cloud gaming catches on as the main medium for gamers, Sony's business model is dead anyway. The key thing here is trying to lock up content away from Amazon and Nvidia to give Microsoft a dominating lead in what could be the future of gaming. In some sense, they are taking a page out of the playbook you are describing Sony has used.. to try to take over this new gaming medium.
1. Subscription based gaming is changing that, as has digital storefronts which enable a long tail, but yes, sales in the first year are the majority revenue and success indicator.
2. I'm not sure Sony is dead in cloud gaming... Gaming is more of an art & content than technology. Google thought they could just walk in with Stadia, but that's dead. Amazon has failed pretty hard so far at original gaming.
Amazon and Microsoft have an advantage running large cloud clouds, but the hardware for gaming is generally dedicated, and Sony could (is?) partner with even a smaller cloud player to host their needed hardware. Nvidia has to be careful to not burn their partners, as they achieve success being content neutral.
Sony already has a cloud product, but unlike Microsoft, is not betting the business on cloud. Why would they when they are dominant player in the previous paradigm? This is classic innovators dilemma.
Very interesting; know someone who just went to work for Rockstar Games (Take-Two) in the hope that another big tech firm would buy them up and they'd get a windfall in the process. This might puncture that vision.
I was wondering if you could shed any light on the local sports networks and the deals they have with certain providers that limit access to them. I'm specifically referring to YES which is only on cable or DirectTV and is preventing me from cutting the cord with cable, but my brother is in MA and the NESN channel was similar until just recently when they announced a standalone streaming service (at a steep price of $29.99/mo). Is there any provision that could challenge these exclusive relationships between channels and providers? Sorry if this is out of your area, but thought you might have some insight.
Matt, could you sometime put together an article that deal with the notion that "It's my/our company and if we want to sell it and we can find a buyer, why shouldn't that be our right?" Even hostile takeovers seem "hostile" only to the point that the buyer finally finds the right price.
And a second point. While we say that we favor free markets, corporations understand that a monopoly position is good for them, and free markets be damned. (I think) we know that free markets lead to more industry innovation than does monopoly, but competition requires nimbleness, and I am not sure enough managers of today have this nimbleness
good flag, thanks
There’s a legit threat to democratic governance when only a few firms control a market instead of dozens or hundreds. FB, Google and Amazon can spend hundreds of millions on lobbying since they don’t have to spend that on innovation or beating competitors
There’s a lot of good companies that teach such “nimbleness”, but companies have to be forced to want to change.
This is great, thanks. I'm more worried about Microsoft rolling up the software development space than anything else, but this acquisition is ludicrous. This also feeds their id management & tracking systems. I shudder to think how that fits with AB's honestly pretty predatory games (microtransactions, loot boxes, etc).
It's not just the console space either. PC gaming has had launcher battles for decades, all trying to see who you are & what you're playing, make sure you're playing "legitimate" games, and of course serving ads. Microsoft doesn't have to participate in that as long as it can force that windows xbox service, and every acquisition makes it more tolerated.
Thank for the info, and the Heads-up on the news, Matt, looking forward to revisit this.
Hey, I'm not sure you have your claims / facts quite right about Microsoft. But I am biased (work for Microsoft, but not in gaming).
1) Microsoft said existing games would stay available for other platforms, but called out future games might be exclusive at the time of the merger. Also, MS did not promise any terms at all to EU, and was passed by EU with no conditions: https://www.videogameschronicle.com/news/the-eu-has-approved-microsofts-acquisition-of-bethesda-parent-zenimax/ . If regulators fail to require terms, how can you blame a company for not following them?
2) Yes, Microsoft market cap is much larger than Sony (my, how much Sony has fallen), but right now, Microsoft is estimated the number 3 console, behind well Nintendo (which has a lot more adult fair then you think) and still far behind Sony. Sony has tons of contractual exclusives and captive studios, far more than Microsoft. Not that it forgives Microsoft, but Sony is generally the worse actor here.
3) I think there is grassroots support for the merger in the gaming industry due to how much folks love some Activision-Blizzard games, but hate what has happened to the company, with employees treated horribly, and lots of greedy money grubbing behavior. Activision-Blizzard needs some "Adult Supervision", and maybe Microsoft could give it to them? is the feeling I see. Which basically means a merger, so Microsoft is the least worst option?
I'd rather we can go after Sony for anti-competitive behavior, and clean up A-B with pressure from Wall Street and customers, and keep A-B as an independent company, but honestly, does anyone think that will happen?
"If regulators fail to require terms, how can you blame a company for not following them?"
Microsoft assured the EU they wouldn't do what they then did. It's true that the EU Competition Authority was stupid enough to believe them, it's also true Microsoft lied. Regardless, consent decrees don't work - Live Nation-Ticketmaster had a consent decree that wasn't worth the paper it was printed on.
"Yes, Microsoft market cap is much larger than Sony (my, how much Sony has fallen), but right now, Microsoft is estimated the number 3 console, behind well Nintendo (which has a lot more adult fair then you think) and still far behind Sony. Sony has tons of contractual exclusives and captive studios, far more than Microsoft. Not that it forgives Microsoft, but Sony is generally the worse actor here."
Sony has to make money in gaming, Microsoft does not. Two wrongs don't make a right.
"I think there is grassroots support for the merger in the gaming industry due to how much folks love some Activision-Blizzard games, but hate what has happened to the company, with employees treated horribly, and lots of greedy money grubbing behavior. Activision-Blizzard needs some "Adult Supervision", and maybe Microsoft could give it to them? is the feeling I see. Which basically means a merger, so Microsoft is the least worst option?"
I think that's a reasonable point, but it doesn't mean that the merger is legal. It just means Activision is poorly run.
"I'd rather we can go after Sony for anti-competitive behavior, and clean up A-B with pressure from Wall Street and customers, and keep A-B as an independent company, but honestly, does anyone think that will happen?"
Yes. This is how it starts.
I appreciate the well thought out comment.
1) This is not necessarily true. In a separate document sent to the EU, MS said that their incentives to make Zenimax games exclusive relies on money recouped via extra Xbox sales and resulting software spend, and said it was implausible. The EU did recognise that Xbox could make Zenimax games exclusive, but I believe the FTC is saying MSFT did not act in good faith. It proposed it was implausible and then months later made all future games exclusive. You can see why regulators now doubt MS on ATVI.
2) Contract competition is how markets work. MS and Sony both compete for the same contracts and MS has many contract exclusives as well, such as Ark 2, PUBG, Roblox, Naraka, Warhammer etc. This is entirely different to owning the biggest third party IP in perpetuity and setting the terms for your competitors. Your comment at Sony makes little sense. MS has spent $80B+ in buying publishers, including two mega publishers, Bethesda and ATVI. Sony has spent ~$5B at best and no mega publisher has been bought.
3) MS just attempted to cancel Xbox Gold subs and double the price of access to online for Xbox players. The pushback was so severe that they had to reverse that decision in days. MS isn't any better than ATVI at money-grubbing and once again this does not excuse anti-competitive behaviour.
Now I understand. FTC themselves were factually wrong, and you were quoting them. That's not a good start to a complaint.
This guy is a little incendiary, I don't agree with all his points, but he points out some of the issues here, and has been looking at the EU story as well: http://www.fosspatents.com/2022/12/us-federal-trade-commission-reportedly.html
I like that blog, but it's a bad faith and inaccurate characterization of the case. First of all, to argue that the case is 'politically motivated' without any evidence reflects anger, not analysis. The FTC staff does not recommend challenges based on legally meritless arguments.
In terms of his point about the EU, that's just wrong. Microsoft declared to the EU that their strategy was not to withhold games from rival consoles. They they did. The reason the EU didn't require a commitment not to do that is because their own economists believed it would be irrational for Microsoft to make Bethesda games exclusive to the Xbox. No commitment needed. Yes that was dumb. But economists don't understand markets.
https://ec.europa.eu/competition/mergers/cases1/202124/m10001_438_3.pdf
See (122) "Furthermore, the Commission notes that the above considerations are consistent with the Notifying Party’s declared strategy in relation to the Transaction. [Microsoft’s future strategy regarding ZeniMax games]
It's very irritating this has even become an argument. The FTC is merely citing from the EU Commission's comments in noting MS claimed they did not have an incentive to make games exclusive, then immediately did so.
Now MS has latched onto this silly idea and are stating the FTC has the facts wrong, which is just in fact plain ignoring what the FTC complaint says.
FOSS has gotten really personal about this case (sound like he had history with A-B), and is a bit less balanced here.
Reading the EU case, I'm amused it completely seems to miss PC gaming. The reason why the analysis is wrong (and Microsoft did exclusives) is that the markets for Xbox + PC Sales + PC/Xbox game pass sales is larger than just the minority position of Xbox in the console market, and several of the recently announced exclusives are of game genres that historically do well on PC. So it is not Xbox exclusive, but it is Microsoft exclusive.
Also, Microsoft made public statements pre-merger that conflicted with (122). That's an interesting miss by the commission.
Do not believe that blog. Florian is a paid shill to Microsoft and in the past Oracle as well. H was caught out as many outlets referred to him as an independent, when in the courts it came out he was being paid by Oracle. Many outlets since then no longer refer to him.
http://techrights.org/2012/08/18/vile-lobbyist/
He is currently being paid by MS and the blog is full of MS PR rhetoric.
Good to know
Lessening competition creates more A-B scenarios. The government’s job is to create or at least maintain competition in markets. It’s virtually the only way to keep company behavior in check. That and increasing company transparency (that reveals, for instance, bad behavior.)
Some thoughts on your first two points:
1. Isn't most gaming revenue derived from new releases? Having a back catalogue of games is very different from having a back catalogue of movies or music. Its the new content that sells here.
2. I don't believe Sony is really the main competition focus here.. Microsoft's eye is on the ultimate prize of cloud gaming, where Sony does not stand a chance. If cloud gaming catches on as the main medium for gamers, Sony's business model is dead anyway. The key thing here is trying to lock up content away from Amazon and Nvidia to give Microsoft a dominating lead in what could be the future of gaming. In some sense, they are taking a page out of the playbook you are describing Sony has used.. to try to take over this new gaming medium.
1. Subscription based gaming is changing that, as has digital storefronts which enable a long tail, but yes, sales in the first year are the majority revenue and success indicator.
2. I'm not sure Sony is dead in cloud gaming... Gaming is more of an art & content than technology. Google thought they could just walk in with Stadia, but that's dead. Amazon has failed pretty hard so far at original gaming.
Amazon and Microsoft have an advantage running large cloud clouds, but the hardware for gaming is generally dedicated, and Sony could (is?) partner with even a smaller cloud player to host their needed hardware. Nvidia has to be careful to not burn their partners, as they achieve success being content neutral.
Sony already has a cloud product, but unlike Microsoft, is not betting the business on cloud. Why would they when they are dominant player in the previous paradigm? This is classic innovators dilemma.
This world Fiona Scott Morton made up where there's no such thing as monopoly leveraging sounds nice.
Very interesting; know someone who just went to work for Rockstar Games (Take-Two) in the hope that another big tech firm would buy them up and they'd get a windfall in the process. This might puncture that vision.
I was wondering if you could shed any light on the local sports networks and the deals they have with certain providers that limit access to them. I'm specifically referring to YES which is only on cable or DirectTV and is preventing me from cutting the cord with cable, but my brother is in MA and the NESN channel was similar until just recently when they announced a standalone streaming service (at a steep price of $29.99/mo). Is there any provision that could challenge these exclusive relationships between channels and providers? Sorry if this is out of your area, but thought you might have some insight.
I don’t know. Sorry.