China Approves Microsoft's Activision Blizzard Acquisition - News
by William D'Angelo , posted on 19 May 2023 / 13,328 Views
China's State Administration for Market Regulation has approved Microsoft's $67.8 billion acquisition of Activision Blizzard unconditionally in a Phase III review, according to a report from Seeking Alpha.
The approval from China comes less than a week after the European Union regulator, the European Commission, approved the deal. The European Commission did conclude the deal could harm competition in the cloud gaming market.
The European Union regulator did identify remedies from Microsoft as it signed multiple 10-year deals with cloud gaming services to bring Xbox games on PC to Nvidia's GeForce Now, Boosteroid, Ubitus, and Nware.
Microsoft has confirmed China has approved the deal in a statement posted by The Verge Senior Editor Tom Warren via Twitter.
Microsoft confirms China's State Administration for Market Regulation (SAMR) has unconditionally approved its acquisition of Activision Blizzard, making it the 37th country to support the deal 👇 pic.twitter.com/OZ2DRgCAth
— Tom Warren (@tomwarren) May 19, 2023
Microsoft and Activision Blizzard are still facing an uphill battle as UK regulator, Competition and Markets Authority (CMA), last month decided to block the deal over concerns with cloud gaming.
Microsoft does plan on appealing the decision with the the Competition Appeal Tribunal in the UK. The company has hired lawyer Daniel Beard KC, who has been able to defeat the EU regulator on multiple occasions.
The deal has now been approved in China, the European Union, Ukraine, South Africa, Japan, Chile, Brazil, Saudi Arabia, and Serbia.
Update: Microsoft's statement confirming China has approved the deal added to the article.
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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It will be difficult for the FTC and the CMA to justify blocking the acquisition... Players want facts and data for the justification of the FTC and CMA, otherwise it will be showing that the teams are incompetent in data analysis and simulations of future scenarios in the stock market. games.
It is not about corruption, as it is very difficult to have proof, but incompetence is easier to show. Australia and New Zealand are missing, so I don't think those countries will block the acquisition, as they already have the FTC and the CMA to fight this war.
The thing is it's not difficult for the CMA. The EU even agreed that cloud gaming and MS/ABK acquisition was a concern. That's why they forced MS to provide 10 year deals for all streaming companies because it relieves their concerns.
The only difference here is that the CMA doesn't trust this remedy is enough and the EU does. That's it. They both agree there is a danger though when it comes to the MS/Cloud gaming and this merger.
There are questions that should be answered:
1) How many users use XCloud, which is a service included only in game pass ultimate?
2) How many users use geforce now or other cloud gaming services?
3) Did the CMA calculations include Game Pass Ultimate players only, or did they include all Game Pass users (PC / Console / Ultimate)?
4) What is the size of the cloud gaming market and its global market share when compared to other game streaming media?
The number of users and the market share are extremely important, because it is one thing to say that out of 100 users 70 use your service (70%), it is another thing to say that out of 100,000,000 users, 70,000,000 use the its service (70%).... that is, stating something only as a percentage can lead to society's misinterpretation of a topic.
Sure those are all valid questions. I'm almost positive all of it is in the report posted by the CMA on their website. You can read the whole thing it's open the public. The issue is there were more reasons than just that in the report. It's not extremely important as you say because the CMA's reasonings went beyond that and so did the EU's. That's why the EU forced the 10 year deals.
Even the EU said that the CMA over calculated MS's market share for cloud but they still had concerns about MS and cloud gaming. So EU didn't agree that MS had a large market share but they still saw issues with MScloudABK merger. So is your argument here that both the EU and CMA were wrong in worrying about cloud concerns?
First we have to understand the market. There is not just one cloud market as it appears that the CMA is suggesting. First if the hosting market. This is like GeForce Now, where you have to first purchase the game through a store and then get a subscription to GeForce Now that allows you to stream that game. Then there is PS+ and GP which both have a streaming option as part of their subscription service. Currently, this model is not a cloud exclusive model since its tied to the subscription service and just gives you an option to either stream the game or download the game to local hardware.
Here is where the nuance of the cloud business comes into play. Is streaming its own separate business for MS and Sony current model or is it another distribution method for delivering games to their users from their subscription service. This is where the EU and the CMA differ, I believe. The EU sees a difference between XCloud and PS Now compared to something like GeForce Now. The reason why I say this is the remedy that the EU accepted. The remedy targets companies that host games in the cloud. Every company that want to host ABK games has a free license to do so. Think about how this effects the cloud hosting market. First, they get all ABK current and future games to host for free. This is a stark difference between any Sony games or even Nintendo games as none of them are on any cloud hosting platform outside of their own. So with the MS deal, all cloud vendors get one of the biggest publishers games on their service for free unlike any Sony or Nintendo games which is a huge win for the hosting companies to expand their business.
Yep I understand all that. The EU sees this as a great thing because they say it will help build the cloud market and give them those licenses for free. Which is great for the next 10 years for those companies. They get something out of it for doing absolutely nothing other than keeping their mouth shut and speaking out against this deal.
The CMA understands that but they see it as MS using these contracts to manipulate the cloud gaming market to grow on their terms. On top of that the head of the CMA prefers a hands off approach when it comes to markets. The EU wants to help the cloud market grow with this deal and the CMA wants to just let the market grow on it's own and not through regulation from governments. They both agree that some of regulation needs to occur because MS poses a threat in cloud gaming but they just have different solutions. The CMA wanted divestment and MS refused the EU was ok with contracts.
It will be 10 years and if Microsoft sees that the revenues from the various cloud gaming services are relevant, it will certainly maintain them and even expand.
The CMA seems to predict that this will be the last generation of consoles and then there will be only cloud computing, but it is too early to say that.
Sony currently manipulates the gaming market for consoles, so it is necessary to create consistent laws for the gaming market as a whole, considering studio acquisitions, exclusivity contracts with third party studios, game quality, content and other things that protect users. users and not companies.
Or Microsoft could decide to just start charging massive licensing fees to all these cloud providers and force everyone to switch to their own it's unknown what will happen no one knows.
This is just flat out false and you really need to stop and go read the full CMA report. They specifically talk about Microsofts next console which will be releasing around 2028.
Sony is doing exactly what Microsoft used to do. Microsoft got timed exclusivity for Tomb Raider. They both do it. MS just doesn't want to play that game anymore.
I do agree with you about laws to stop all these acquisitions, third part exclusivity, etc but not sure how you enforce that.
For instance how can you force a small developer to create their game not just for Sony but also for MS if they don't have the man power to do it? They would obviously go with Sony first because of the market share. Laws like that could end up making it impossible for smaller studios to even get started because they don't have the financing to develop for all consoles. On top of that does Nintendo get included as well with their horrible specs? Because now all games will be required to run on Nintendo and everyone gets held back multiple gens because of their weak specs.
That is the problem, 10 years and these companies grow their business which the CMA is saying they are protecting but they are not. MS cannot control the hosting cloud business because they do not control the total amount of software in the gaming space. MS can only control their own software. This is no different from Sony can only control their own software. This is where the guessing comes in from the CMA. 10 years is a long time, but do you believe in 10 years, MS games will be so important that they make Sony and Nintendo offerings obsolete. Do you believe in 10 years, MS will have so many high-profile games that these services who offer more than just ABK games will not have a portfolio of games in their service. In 20 years MS has not come close to something like this and I highly doubt they will come close to it in another 10 years. What this deal does do, is jumpstart the hosting cloud business because in the absence of Sony, Nintendo and even EA games, this helps their business and could propel them to be able to get deals from other publishers. It just appears the EU has a much better understanding of the market and the cloud market in general than the CMA. You are right, the cloud hosting market companies want the CMA to go away because with their interference, they could set back the market maturity far longer.
You might be right I don't know. The CMA's approach seems to be to just let the market grow on it's own. While the EU believes they can help the market grow through regulation. I don't know who's right or wrong.
The CMA published it as a percentage, so it's not possible to know the real impact, so I ask....
60 to 70% of how many users?
What is the market share of cloud gaming in the gaming industry, as according to Newzoo gaming platforms are divided into 50% mobile, 28% consoles and 22% PC. The consoles still have the division of 43% Playstation, 36% Nintendo and 21% XBox.
If cloud gaming uses hardware from any of the three platforms, then the problem is not a restriction, since the market share of consoles only represents 28% of the entire gaming market. The Playstation could not complain about restriction, as it would be enough for it to run any Cloud Gaming service, since Microsoft's proposal is "the user chooses which platform he wants to play", and I don't think that Microsoft would restrict the access of Playstation to Activision Blizzard content, as any company works to maximize profits.
I don't believe the FTC or CMA have solid arguments to stop the acquisition.
Once again you're focused on the market share. This wasn't their only concern. The EU was worried about Microsoft and cloud gaming when it came to this merger as well. That's why the EU imposed the 10 year deal. Now if you disagree with the EU and CMA fair enough.
I can't answer your questions about the calculations. It's all in the CMA's report on their website though. Go read it and you'll have the answer to your questions.
The FTC's argument is related to console which was dropped by both the CMAEU so their argument for stopping the deal is different. Although I'm sure they will now use cloud gaming once this heads to court. If they are allowed to change their argument. Not sure how the FTC works but most seem to agree MS will have no issue burying the FTC in court.
I do not believe you understand the point. MS and Sony provide their own hardware to power their cloud offerings. Meaning that Sony has a bigger market share of users thus they have a bigger pool of cloud users with PS Now then MS. There is no scenario where MS has 70% of the cloud market if you are using GP as the source of data. Sony has way more customers on PS+ by virtue of having way bigger market share than MS. GP was last stated to have 25 million users but PS+ is well over 40 million from the last estimate.
Next is you are giving way to much credit to the CMA report when MS has already shone that the CMA can make calculations incorrectly which made the CMA have to drop the console SLC when it was pointed out by MS. The CMA isn't batting a 1000 here and its evident that their calculations are also inaccurate when it comes to the Cloud SLC.
The biggest problem I have with the CMA report is how they look at XCloud. Its tied to GP as more a distribution service for games then its own business model just like PS Now is tied to PS+. So to say MS has 60% market share without considering the structure of the market or how the service is used seems bad. Even Nintendo have their own cloud service which still makes MS the 3rd place based on market share between all 3 console providers. MS has no presence in the Cloud hosting business so exactly what market does the CMA see MS dominance in.
I do understand the point completely. You guys think MS doesn't have a large market share and that the CMA calculations are wrong. I'm not disagreeing with that I honestly don't know. What I do know is that the EU 100% agrees with you and thinks the CMA calculations are wrong when it comes to cloud market share.
And yet with all that said the EU still had issues with MS and cloud gaming because it's not just about the market share. I dont know why people keep bringing it up. That's not the only issue here. Go read the full CMA report and they outline all the issues they have.
I think you are still confusing things. Yes, the EU had concerns and they provided a solution to those concerns. That solution is the 10 year free license to all ABK games. This is in stark contrast to the CMA who provided no solutions, did not work with MS on a solution and just threw out a verdict. One agency does not mind concessions as remedies to a situation that could be an issue while the other agency does not want to do anything. What the CMA does not do is help promote the same market they say they are protecting while every vendor in that market would rather they step away as they are getting in the way of them expanding their business. When the vendors in that market say you do not know what you are doing, that should say alot about the trust those vendors have in the CMA decisions.
It is interesting when you put data from the internet with the CMA and FTC reports...
*Platforms:
Mobile: 50%
Console: 22%
PC: 28%
* Consoles
Playstation (PS4 + PS5): 152,840,000 (43.75%)
Nintendo (Switch): 123,910,000 (35.47%)
XBox (one + series): 72,630,000 (20.79%)
It becomes more interesting when you see the global relevance of each console, so we have:
Playstation (PS4 + PS5): 43.75% 28% = 12.25%
Nintendo (Switch): 35.47% 28% = 9.93%
XBox (one + series): 20.79% 28% = 5.82%
As you can see, if you exclude Playstation and Nintendo from cloud gaming, Microsoft would still provide 77.82% (100 - 12.25 - 9.93) of hardware. I think it is unlikely that Microsoft will restrict cloud gaming, as shareholders want to maximize profits, so it is necessary to offer the service to as many hardware as possible. There is also the detail of cloud gaming helping other stores, as the person needs to buy the game on Steam, Epic Game and other stores. The CMA has to justify how this negatively affects the user, since, if the person buys a product, it would be fair for him to be able to choose where to play.
Your point is that MS will be forced to keep it open because of share holders. What if MS can convince share holders that by restricting their software to just their ecosystem in time they will end up with more revenue?
EA and Ubisoft both have to listen to share holders but both of them decided to pull their software from the largest PC store Steam and they did it for years. They came back but they did do it. Who's to say MS wont do the same?
The reasons are simple:
1) Income from various sources;
2) Company image;
3) Ease before government agencies regarding new investments (acquisitions or opening of new businesses);
4) More likely to generate large returns for shareholders;
5) Return on investment (ROI).
The question I ask anyone... most people are moved by money, so I believe that Satya Nadella, Phill Spencer and other people from Microsoft's strategic and tactical body would like to have an increase in the company's revenues and, consequently , increase in their salaries and benefits. Microsoft doesn't have to be good, but it should seek to stay within the law and aim for profit maximization.
10 yea is a long time. Mrket now vs 10 years time would be completely different. No one can predict how the market will be like after 10 years. Thats based on alot of assumptions by the cma. Theres alot of competition with cloud atm . If i am not mistaken ge force now has more users then ms does?
The EU wanted concessions because it will accelerate the Cloud market and it does not give MS an advantage they can then leverage from the ABK sell. That is totally different from the CMA who seems to not to understand the difference between the hosting cloud market and the service cloud market which is XCloud. MS does not have a presence in the hosting market and with this free license for any vendor that allows all hosting cloud vendors to accelerate and expand that market with ABK games which they would not have access to without this merger. XCloud on the other hand is a distribution service more than a separate market. Its primary use in GP Ultimate is as another means to play your games you can either download from GP or just stream it from the service. This is probably where MS is going to make their case and the CMA will need a way to defend their stance.
Microsoft is gonna force the FTC to go to federal court where they will 100% destroy them, by then the deal will be approved worldwide and the UK is standing there alone like "uhh guys.. wtf?"
They were standing alone during the Facebook/Giphy merger as well. That didn't stop them.
Yes but those cases were not merger cases there's a huge difference. There's a reason the CMA was always the biggest hurdle in this case and that's because everything goes back to the CMA. Another company beat the CMA during their CAT appeal guess what happened? They were still forced to divest anyways. That's the thing about the CMA even if you get the CAT to agree they send it back to the CMA and then they just come back to the same requirements - divestment.
That's why in the CMA report they listed out several reasons for why this deal isn't good. MS isn't going to just have to go after one argument they are going to have to go after every single argument the CMA laid out. They will also have to do this while the EU just agreed with the CMA that MS and cloud gaming is a danger. The only difference is the CMA wanted divestments and the EU was ok with just 10 year contracts. The CMA even told MS ahead of time that behavioral remedies wont be enough but they would entertain the ideas. MS didn't listen and refused to engage in divestment talks and this is where we are now.
If CAT is as useless as you make them sound, why does CAT even exist? If CMA refuses to approve of the merger without any further concessions, then Microsoft can sweeten the deal by removing Activision games from UK Game Pass (but still include it other parts of the world that approved the merger), making it impossible for CMA to justify how it would be a monopoly. No Activision games on UK Game Pass would make it easier for other cloud companies to compete. Good luck claiming there’s a monopoly.
The CAT exist to make sure the CMA isn't doing anything illegal or just being outright irrational. Considering the EU agreed with the CMA irrational is off the table. There is nothing they are doing that's illegal either. Also the CMA doesn't just look at a merger case and decide if it's a monopoly or not. They also look at the damage it will cause to the industry as a whole. Which once again the EU has agreed that there is that possibility which is why the imposed the 10 year deals. Maybe your plan will work but good luck against the CMA. Like I said they laid out several reasons in their 400 page report. Hurting UK consumers over this deal is unlikely to convince the CMA to approve.
Actually irrational isn’t off the table just yet. While the EU did agree with CMA on most things, they disagreed with CMAs decision to treat cloud gaming as its own seperate market (there was an article on this website regarding this a few days ago). EU says that cloud gaming is a segment of the overall gaming industry, not a completely seperate entity standing on its own. CMA sounds irrational to me for treating cloud gaming as a separate market from the rest of the gaming industry.
You do know both the EU and CMA agreed that there were issues when it comes to MS and cloud gaming right? The only difference here is that the EU imposed a 10 year free streaming license on MS. While the CMA has decided it's not worth getting involved in regulating a growing market. They have several other reasons but that's the basic conclusion.
Not exactly.
Both agree that pure streaming service (BYOG) is a concern but is properly addressed by MS remedies. (even the CMA)
Both agree there's no SLC concern over digital stores and subscription-based game library business markets.
where they differ is that the EU doesn't consider cloud streaming for an actor that has either a store or subscription game library as its own market as they view the cloud streaming there as only a distribution medium. The CMA views those as part of the cloud market instead of the subscription and or game store market.
The problem with CMA assessment is that no actual content exists that forces an actor to solely rely on cloud streaming as their offering making it not a market on its own but simply a feature or distribution medium of other markets. Also, there are no remedies that MS can propose to resolve issues regarding those that would not actually apply to digital stores and subscription services overall where the CMA themselves found no issue. Force MS to license titles to Amazon, you are not benefitting Luna cloud service you're benefitting Luna subscriptions offering.
Eu also said that CMA overstated the numbers for cloud gaming that ms has. If eu can accept the remedies then so can CMA. Just shows that CMA is corrupt. 10 years is a good deal as nobody knows what will happen to cloud gaming in 10years. For all we know if may not have changed or it could grow or it could be dead. CMA having assumptions that ms will dominant without actual facts is just wrong
The FTC is not attempting to stop the deal from closing. They have sued in their own administrative court (for lack of a better name for it), which does not have jurisdiction to block the deal. There is zero chance that the case goes to trial in the US.
As any sensible regulator should.
Is Xi Xinping aware of this deal??
It Xi Jinping, and ... maybe? He is old (70) and his politics show a clear failure to understand and lacking interest in modern technology, all he sees in it is how it corrupts the youth (hence the drastic measures for youth protection in gaming in china). But MS-Activision is huge and that includes China which has a big mobile and PC gaming market. So he might be aware, but probably not involved in the ruling.
I hope you guys keep that same energy when China and or Saudi Arabia start buying out your favorite game company.
Chinese publisher Tencent acquired one of my factories developers Grinding Gear Games (makers of Path of Exile), yet that did not bother me one tiny bit. I still play Path of Exile.
Both Tencent and the Saudi Arabic Public Investment fond are already heavily involved in gaming.
Of course China approves. China doesn't care. Not like they let those games be played in China anyways loll jk
hell yes china!!! its looking like i might enjoy diablo 4 on gamepass after all ........in a couple months after launch idk if the deal will close when that game launches
It's going to take at least 18 months for the CATCMA process to play out.
mmmmm ok i still have to get diablo 4 i cant wait that long=( but i can wait for cod titles.diablo is the only game in this buyout that i cant wait for. ok so i pay full price this time
MS paying off a lot of countries
Another unconditional approval. CMA & US FTA corruption move evident every single day. Even Communist China regulator has more credibility than those 2 fraudulent institutions in this regard.
Don’t see Chinese regulators making any ludicrous claims that cloud gaming is treated as a distribution “‘monopoly” among many ways to play & pay for games….which has zero legal basis.
Yet again you are claiming corruption based on wild conjecture simply simply because you disagree with the conclusions drawn. It would be like me claiming you’ve been paid by Microsoft to keep posting this stuff - wild accusations based on spurious assumptions.
China has looked at the Chinese gaming market, which is in a very different place to the US and UK gaming markets. Not massively surprising that they can reach different conclusions.
