Microsoft is buying Activision in a $69 billion deal to reshape video gaming. Meanwhile, government antitrust enforcers are gearing up to stop mergers just like this.
On a personal level, my beef with the software industry, in general, is the recent trend of renting software rather than selling it. My use of software is personal rather than business and the monthly charges are outrageous. Libre Office is a pretty good substitute for the most used programs - Word, Excel, and Powerpoint, but the Libre Office database and Draw programs are far from intuitive which is not very helpful.
I'm more stymied by Adobe's Creative Suite, also only rented now. Fortunately I have Creative Suite 6 on our 24" Mac, which I can presumably use as long as the CD holds up. Adobe is more of a problem for me because I am a complete amateur and Adobe is brilliantly intuitive where other "similar" software is not.
My last peeve is Firefox's relatively new "containers" including a pre-set container for Facebook (now Meta), preventing F/M from following you around the internet. But where's the container for Google? I don't want Google following me around either.
I have a friend whose attitude toward the collection of data is that if you haven't done anything wrong you don't have anything to worry about. This same argument was used in a comment on Reddit and a lawyer responded, citing examples of seemingly innocent online comments which could cause problems for the author. (He put it more aggressively.)
Finally, re the innocent Gates. What he's doing owning over 200,000 acres of farmland? As my mother said to a 5 yo boy (son of salesman who lived on on our block) who asked "Wanna buy some rocks?" , "Ooh, you're up to no good."
I recently experienced the joy of Microsoft vertical integration when trying to set up a computer for my kid. Windows will automatically block Firefox (for safety reasons) and can only be unblocked through a crazy multi step confusing login process with safety warnings popping up everywhere. “Microsoft Edge is the safest browser, are you sure you want to unblock this dangerous browser?”
They’ve integrated Edge and Bing into the start menu and the taskbar to show the news and weather and stock prices, and there is no easy way to turn it off.
I used to like Windows because it largely let the user tell the machine what to do. All this nudging and paternalism is really not good. This is worse than what they did to Netscape.
It always astounded me how the US government and even EU commission have always allowed Microsoft to continue its monopoly like tactics, aiming for every other big tech firm while ignoring the elephant in the room. Its almost conspiratorial. Is there a vendor lock in as predatory as Office 365? Pretty much every individual competitor of Office 365 products has been smothered out by its bundling price.
Regarding gaming. I really hope Matt you focus on this digital space. The lines between digital mediums are collapsing, any AR/VR application requires game dev skills and what is the number 1 category of user time and spend online/app store: gaming. Gaming IP owners are going to be big winners, especially if they are vertically integrated and own the hardware.
Xbox has been completely dominated by Playstation in the platform, app store like model. Playstation owns 70% of software transactions worldwide, two times Xbox's revenue and exclusives that outsell Halo multiple times over. So what does Microsoft do? Smother the competition with its money.
The metaverse is a complete trojan horse to regulators meant to justify massive spend and act like Apple/Google/Amazon are direct competitors (akin to how Facebook classifies itself competing with every website). The real reason here is to snuff out Playstation in the gaming space and prop Gamepass as the defacto business model for gaming. Activision has 200M MAU for console/PC players, number 2 in gaming, enough to single-handedly brute force mass adoption by bundling with Gamepass, something Playstation has stopped them doing for a long time.
So here we are, the number 2 richest company in the world, buys the number 1 supplier of content for its competitors, buys the number 2 online playerbase for its number 2 subscription service, and also the number 1 best selling game on its competitors platform for a decade running.
One can only hope regulators shut this down immediately. Its about time Microsoft had its wings clipped permanently.
Reminds me of your 2019 Slow Death of Hollywood article.
Market power, market power, market power. Yes, they want dollars–profits–if they can get them, but market power gives freedom of action to do as one wishes.
In the 2019 article, for me the proof of this is Netflix deliberately canceling popular shows after only two seasons. Market power is more important than profits.
It’s the same story always. Just like the Alcoa story recounted in your book.
Going by recollection, it seems a bit inaccurate to portray the outcome of the Netscape case as any real downfall for M$ or Gates personally. Yes things could have gone worse for the government, and yes, the Intuit result did matter. But if the DOJ was celebrating a "victory," the guys at M$ sure seemed to be laughing behind the scenes. The whole time it felt like M$ playing Br'er Rabbit to the DOJ's Br'er Fox. I'm pretty sure M$ valuation and profits continued to go up in years immediately after. Public sentiment did sour a bit, but Gates could not have cared less about that.
What the case demonstrated was how it is effectively impossible to use legalese to impose fine grained constraints on software behavior. (And 1000x worse for proprietary software.) It's like trying to do brain surgery with a butcher's knife. M$ always felt that whatever the outcome, they'd find a way to obey the letter of the law while ignoring its intent. And I always bet they were right on that. Big, blunt rules can work. So the only sound outcome for the case would have been to make M$ choose: Applications OR OS. Like Glass-Steagall for the software biz.
And while not exactly on topic, Netscape itself can be seen as the official start of the kind of "Value of Nothing Capitalism" extensively criticized in previous threads by David Hincapie. The only "rational expectation" that could justify the IPO valuation at the time was an expectation that DOJ would break up M$. And not a single person I know seriously believed that would happen.
How is this any different than movie studios controlling movie theaters last century? Today, there are enough competitors in the entertainment space to cause competition of vertically integrated production studios. Gaming is too concentrated with only two platforms competing at the high end. Separation of production and distribution seems applicable here also.
I'd be interested in hearing more about if there is monopoly power in the gaming industry. There seems to be a "rottenness" growing in games, with more and more fan beloved game companies falling to corporate infighting, disappointing products, and predatory customer practices. I'm curious if consolidation is driving any of that.
First off, thank you, Matt, for your unwavering devotion towards fighting monopoly power.
Second, I think the acquisition has more of a long-term value. Microsoft likely views Meta, rather than Sony and Nintendo, as its proper rivals. And Meta has been on a VR and gaming buying spree lately.
Microsoft could not participate fully in the spoils of Web 2. It intends not to miss the gravy train for the metaverse.
Third, I don't think the games will become exclusive. Minecraft hasn't gone exclusive in nine years. And going exclusive will attract all the antitrust heat Microsoft has skillfully avoided.
It will also mean serious loss in revenue for multiplatform games.
Fourth, I took a long look at Activision's annual reports the day before. They approved two large share buybacks and yet never repurchased a single share. Seems to me they were creating defences against an acquisition and then changed their minds. It didn't hurt that Microsoft paid 45 percent over market value. And that scandals have rocked management.
Finally, I still rather like Bill Gates. He got into philanthropy to reform his image and somewhere down the line, began to genuinely enjoy it. Still a preferred alternative.
Great article, thank you for being a voice on monopoly, there aren't that many out there right now. I00% agree that this acquisition is about Microsoft leveraging market power to crush competition, while building a walled garden for Game Pass.
You made a comment "what Microsoft is SORT OF doing with Teams". Microsoft's leverage of bundling on Teams, Office / Microsoft 365, Azure is crushing the competition. They regularly charge their customers more for their 365 subscription if the customer isn't actively using Teams (eliminating competitors like Slack, Zoom, Cisco, and many Security companies). They use their analytics software to determine which of their customers are using competitors products then drive and compensate their sales team to leverage 365 / Azure pricing to remove competition. This is typically one of the largest spends of a CIO, they have little leverage or market viable alternatives (due to 20 years or stifling competition). They are raising the price of E3 in the next few months, CIO's will only be able to afford this by reducing the spend on competitive products.
The Slack complaint to the European Commission is gaining momentum and they are branching out beyond Teams, to look at these bundling practices with Office / Azure. It is time for the US gov't to wake up !!!
" IBM CEO John Opel, who referred to the young Bill as “Mary Gates’ boy“ before his firm handed Microsoft the contract to make the operating system for the nascent personal computer."
That one deal is what made Bill Gates and Microsoft. I always figured Gates was a business genius (not a programming genius because he didn't even write MSDOS) but it turns out his mom had a connection. What a pathetic loser.
Everyone who followed Microsoft as they gobbled smaller but better competitors in the 90's knew Windows was crap. Typically they bought a competitor and then the innovation stopped. Sometimes they just copied a competitors product and gave it away for free, driving the competitor out of business. Bill Gates led the way, all the way down to the bottom, stifling improvement because it wasn't coming from his company.
Imagine how things could have been, Gates set the computer industry back by 20 years. Same shit from Facebook now. Social media could be so much better but real competition and innovation is nonexistent.
Great piece, I liked it a lot. One small correction though - 'vig' specifically refers to illegal interest on a loan a mobster makes. Because the interest is so high, the payments are interest only, so the principal never gets paid off, and the wiseguy gets payments from the victims for months or years on end.
On a personal level, my beef with the software industry, in general, is the recent trend of renting software rather than selling it. My use of software is personal rather than business and the monthly charges are outrageous. Libre Office is a pretty good substitute for the most used programs - Word, Excel, and Powerpoint, but the Libre Office database and Draw programs are far from intuitive which is not very helpful.
I'm more stymied by Adobe's Creative Suite, also only rented now. Fortunately I have Creative Suite 6 on our 24" Mac, which I can presumably use as long as the CD holds up. Adobe is more of a problem for me because I am a complete amateur and Adobe is brilliantly intuitive where other "similar" software is not.
My last peeve is Firefox's relatively new "containers" including a pre-set container for Facebook (now Meta), preventing F/M from following you around the internet. But where's the container for Google? I don't want Google following me around either.
I have a friend whose attitude toward the collection of data is that if you haven't done anything wrong you don't have anything to worry about. This same argument was used in a comment on Reddit and a lawyer responded, citing examples of seemingly innocent online comments which could cause problems for the author. (He put it more aggressively.)
Finally, re the innocent Gates. What he's doing owning over 200,000 acres of farmland? As my mother said to a 5 yo boy (son of salesman who lived on on our block) who asked "Wanna buy some rocks?" , "Ooh, you're up to no good."
Sorry for a minestrone of a comment.
I recently experienced the joy of Microsoft vertical integration when trying to set up a computer for my kid. Windows will automatically block Firefox (for safety reasons) and can only be unblocked through a crazy multi step confusing login process with safety warnings popping up everywhere. “Microsoft Edge is the safest browser, are you sure you want to unblock this dangerous browser?”
They’ve integrated Edge and Bing into the start menu and the taskbar to show the news and weather and stock prices, and there is no easy way to turn it off.
I used to like Windows because it largely let the user tell the machine what to do. All this nudging and paternalism is really not good. This is worse than what they did to Netscape.
It always astounded me how the US government and even EU commission have always allowed Microsoft to continue its monopoly like tactics, aiming for every other big tech firm while ignoring the elephant in the room. Its almost conspiratorial. Is there a vendor lock in as predatory as Office 365? Pretty much every individual competitor of Office 365 products has been smothered out by its bundling price.
Regarding gaming. I really hope Matt you focus on this digital space. The lines between digital mediums are collapsing, any AR/VR application requires game dev skills and what is the number 1 category of user time and spend online/app store: gaming. Gaming IP owners are going to be big winners, especially if they are vertically integrated and own the hardware.
Xbox has been completely dominated by Playstation in the platform, app store like model. Playstation owns 70% of software transactions worldwide, two times Xbox's revenue and exclusives that outsell Halo multiple times over. So what does Microsoft do? Smother the competition with its money.
The metaverse is a complete trojan horse to regulators meant to justify massive spend and act like Apple/Google/Amazon are direct competitors (akin to how Facebook classifies itself competing with every website). The real reason here is to snuff out Playstation in the gaming space and prop Gamepass as the defacto business model for gaming. Activision has 200M MAU for console/PC players, number 2 in gaming, enough to single-handedly brute force mass adoption by bundling with Gamepass, something Playstation has stopped them doing for a long time.
So here we are, the number 2 richest company in the world, buys the number 1 supplier of content for its competitors, buys the number 2 online playerbase for its number 2 subscription service, and also the number 1 best selling game on its competitors platform for a decade running.
One can only hope regulators shut this down immediately. Its about time Microsoft had its wings clipped permanently.
Reminds me of your 2019 Slow Death of Hollywood article.
Market power, market power, market power. Yes, they want dollars–profits–if they can get them, but market power gives freedom of action to do as one wishes.
In the 2019 article, for me the proof of this is Netflix deliberately canceling popular shows after only two seasons. Market power is more important than profits.
It’s the same story always. Just like the Alcoa story recounted in your book.
Going by recollection, it seems a bit inaccurate to portray the outcome of the Netscape case as any real downfall for M$ or Gates personally. Yes things could have gone worse for the government, and yes, the Intuit result did matter. But if the DOJ was celebrating a "victory," the guys at M$ sure seemed to be laughing behind the scenes. The whole time it felt like M$ playing Br'er Rabbit to the DOJ's Br'er Fox. I'm pretty sure M$ valuation and profits continued to go up in years immediately after. Public sentiment did sour a bit, but Gates could not have cared less about that.
What the case demonstrated was how it is effectively impossible to use legalese to impose fine grained constraints on software behavior. (And 1000x worse for proprietary software.) It's like trying to do brain surgery with a butcher's knife. M$ always felt that whatever the outcome, they'd find a way to obey the letter of the law while ignoring its intent. And I always bet they were right on that. Big, blunt rules can work. So the only sound outcome for the case would have been to make M$ choose: Applications OR OS. Like Glass-Steagall for the software biz.
And while not exactly on topic, Netscape itself can be seen as the official start of the kind of "Value of Nothing Capitalism" extensively criticized in previous threads by David Hincapie. The only "rational expectation" that could justify the IPO valuation at the time was an expectation that DOJ would break up M$. And not a single person I know seriously believed that would happen.
How is this any different than movie studios controlling movie theaters last century? Today, there are enough competitors in the entertainment space to cause competition of vertically integrated production studios. Gaming is too concentrated with only two platforms competing at the high end. Separation of production and distribution seems applicable here also.
I'd be interested in hearing more about if there is monopoly power in the gaming industry. There seems to be a "rottenness" growing in games, with more and more fan beloved game companies falling to corporate infighting, disappointing products, and predatory customer practices. I'm curious if consolidation is driving any of that.
First off, thank you, Matt, for your unwavering devotion towards fighting monopoly power.
Second, I think the acquisition has more of a long-term value. Microsoft likely views Meta, rather than Sony and Nintendo, as its proper rivals. And Meta has been on a VR and gaming buying spree lately.
Microsoft could not participate fully in the spoils of Web 2. It intends not to miss the gravy train for the metaverse.
Third, I don't think the games will become exclusive. Minecraft hasn't gone exclusive in nine years. And going exclusive will attract all the antitrust heat Microsoft has skillfully avoided.
It will also mean serious loss in revenue for multiplatform games.
Fourth, I took a long look at Activision's annual reports the day before. They approved two large share buybacks and yet never repurchased a single share. Seems to me they were creating defences against an acquisition and then changed their minds. It didn't hurt that Microsoft paid 45 percent over market value. And that scandals have rocked management.
Finally, I still rather like Bill Gates. He got into philanthropy to reform his image and somewhere down the line, began to genuinely enjoy it. Still a preferred alternative.
Great article, thank you for being a voice on monopoly, there aren't that many out there right now. I00% agree that this acquisition is about Microsoft leveraging market power to crush competition, while building a walled garden for Game Pass.
You made a comment "what Microsoft is SORT OF doing with Teams". Microsoft's leverage of bundling on Teams, Office / Microsoft 365, Azure is crushing the competition. They regularly charge their customers more for their 365 subscription if the customer isn't actively using Teams (eliminating competitors like Slack, Zoom, Cisco, and many Security companies). They use their analytics software to determine which of their customers are using competitors products then drive and compensate their sales team to leverage 365 / Azure pricing to remove competition. This is typically one of the largest spends of a CIO, they have little leverage or market viable alternatives (due to 20 years or stifling competition). They are raising the price of E3 in the next few months, CIO's will only be able to afford this by reducing the spend on competitive products.
The Slack complaint to the European Commission is gaining momentum and they are branching out beyond Teams, to look at these bundling practices with Office / Azure. It is time for the US gov't to wake up !!!
" IBM CEO John Opel, who referred to the young Bill as “Mary Gates’ boy“ before his firm handed Microsoft the contract to make the operating system for the nascent personal computer."
That one deal is what made Bill Gates and Microsoft. I always figured Gates was a business genius (not a programming genius because he didn't even write MSDOS) but it turns out his mom had a connection. What a pathetic loser.
Everyone who followed Microsoft as they gobbled smaller but better competitors in the 90's knew Windows was crap. Typically they bought a competitor and then the innovation stopped. Sometimes they just copied a competitors product and gave it away for free, driving the competitor out of business. Bill Gates led the way, all the way down to the bottom, stifling improvement because it wasn't coming from his company.
Imagine how things could have been, Gates set the computer industry back by 20 years. Same shit from Facebook now. Social media could be so much better but real competition and innovation is nonexistent.
Great piece, I liked it a lot. One small correction though - 'vig' specifically refers to illegal interest on a loan a mobster makes. Because the interest is so high, the payments are interest only, so the principal never gets paid off, and the wiseguy gets payments from the victims for months or years on end.