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How-do-you-do, and welcome to Protocol Entertainment, your guide to the business organisation of the gaming and media industries. This Friday, we're taking a await at Microsoft and Sony's increasingly bitter feud over Call of Duty and whether U.K. regulators are leaning toward torpedoing the Activision Blizzard deal.

Call of Duty is starting to sink the Activision ship

For Microsoft's Activision Blizzard acquisition, the fate of Telephone call of Duty is starting to look less like a bargaining flake and more like a deal breaker. On Wednesday, the U.K.'s Contest and Markets Authority, one of iii pivotal regulatory bodies arguably in a position to sink the acquisition, published a 76-page study detailing its review findings and justifying its determination last month to move its investigation into a more in-depth 2nd stage.

Microsoft hit back — hard — and accused the CMA of parroting the talking points of its prime number competitor, Sony. Only the Xbox maker has wearied the number of different ways it has already promised to play nice with PlayStation, especially with regards to the exclusivity of future Call of Duty titles. Unless Microsoft is able to satisfy Sony's aggressive demands and appease the CMA, it now looks like the U.K. has the power to doom this deal like it did Meta's acquisition of Giphy.

The CMA is focusing on three key areas: the console market, the game subscription market, and the cloud gaming market. The regulator's report, which it delivered to Microsoft last month but only simply fabricated public, goes into detail most each one, and how games equally big and influential as Call of Duty may give Microsoft an unfair reward.

"The CMA is concerned that having full control over this powerful catalogue, especially in light of Microsoft's already strong position in gaming consoles, operating systems, and cloud infrastructure, could consequence in Microsoft harming consumers by impairing Sony'southward — Microsoft's closest gaming rival — ability to compete," the study said.
The CMA said it'southward also concerned virtually "other existing rivals and potential new entrants who could otherwise bring healthy competition through innovative multi-game subscriptions and deject gaming services."
"The CMA recognises that ABK's newest games are not currently available on whatsoever subscription service on the solar day of release but considers that this may change as subscription services go on to grow," according to the report. "After the Merger, Microsoft would gain command of this important input and could use it to harm the competitiveness of its rivals."
In other words, if Microsoft owned Call of Duty and other Activision franchises, the CMA argues the company could utilize those products to siphon away PlayStation owners to the Xbox ecosystem by making them available on Game Pass, which at $ten to $15 a month can exist more attractive than paying $60 to $70 to own a game outright.
The CMA argued that Microsoft could also encourage players to play Activision games on Xbox devices, even if they were available on both platforms, through perks and other giveaways, like early access to multiplayer betas or unique bundles of in-game items.

Microsoft responded with a stunning accusation. In a formal response, Microsoft defendant the CMA of adopting "Sony's complaints without considering the potential damage to consumers."

The CMA "incorrectly relies on cocky-serving statements by Sony, which significantly exaggerate the importance of Telephone call of Duty," Microsoft said. The visitor likewise defendant the CMA of adopting positions laid out by Sony without the "appropriate level of critical review."
Microsoft reiterated many of the points it's fabricated since the deal was appear in Jan, including its commitment to release Call of Duty games on PlayStation for "several more years" beyond Activision's existing agreements, a concession PlayStation chief Jim Ryan said last month was "inadequate."
In its statement, Microsoft said taking Call of Duty abroad from PlayStation players would "tarnish both the Call of Duty and Xbox brands," and implied that Sony, as market leader, does not need the franchise to proceed dominating the console infinite.
"The suggestion that the incumbent market leader, with clear and enduring market power, could be foreclosed by the third largest provider equally a result of losing access to one title is non credible," Microsoft said. "While Sony may non welcome increased competition, information technology has the ability to adapt and compete."
Microsoft as well went to corking lengths to play downwards its position in the gaming marketplace, a tactic that while strategically necessary does also feel dishonest.
Microsoft said information technology was in "last place" in the console race, "seventh identify" in the PC market place, and "nowhere" in mobile game distribution.
In August, Microsoft said pulling Phone call of Duty from PlayStation would exist unprofitable, and in this contempo filing it claimed that Sony would still take a larger install base than Xbox if every single Call of Duty actor on PlayStation switched to Microsoft'south ecosystem.
In a secondary issues statement released Friday, the CMA responded to some of Microsoft'due south complaints and said the company was not fairly representing the incentives it might take to employ the deal to "prevent" Sony's ability to compete.

Sony is playing a savvy, but disingenuous, game. The PlayStation maker has come out against the deal to the CMA and other regulators around the globe, but in many ways the tactics it says it fears Microsoft may employ if it owns Activision Blizzard are the very same tactics Sony has relied on for many years.

Sony's leading market position is due in part to the company'south first-political party studios, many of which it acquired, and the sectional games they produce.
Sony also has for years paid Activision Blizzard for exclusivity rights to sure elements of yearly Phone call of Duty games (similar early access to betas); that'south the very same contractual agreement Microsoft said information technology will award if the deal goes through.
Notwithstanding at the aforementioned time, Sony is telling the CMA information technology fears Microsoft might entice players abroad from PlayStation using like tactics. "According to SIE, gamers may wait that CoD on Xbox volition include extra content and enhanced interoperability with the console hardware, in add-on to any benefits from membership in [Xbox Game Pass]," the CMA report said. "SIE submitted that these factors are probable to influence gamers' choice of console."
Sony, of course, has reason to be worried. Phone call of Duty is a major revenue-driver on PlayStation because of the console's large install base of operations of more than than 150 million units.
But beyond that, Microsoft's strategy of acquiring studios, putting more games on its subscription platform, and supporting game streaming is undermining Sony's business model. Information technology may also be true that Microsoft is only and then big and its pockets so deep that it's the only company that can afford this strategy.
Sony has begun to answer to the changing market, but slowly and often half-heartedly. Many of the Xbox ecosystem'due south virtually bonny features — like existence able to buy a game on Xbox and play it on PC, or streaming Game Laissez passer games to multiple screens — are nonexistent in the PlayStation ecosystem, and Sony has made clear it has no desire to modify that.
Sony'southward position on some of these policies, and its feet-dragging response to subscription and cloud gaming and cross-platform play, suggests to me it would rather regulators finish Microsoft's advances than have to defend its ain platform through contest.

Picking sides in this increasingly bitter feud is no easy job. Microsoft does indeed offering platform perks Sony does not, and we can imagine those perks extending to players of Activision Blizzard games if the deal goes through.

But Microsoft is also ane of the world's largest corporations, and praising such colossal industry consolidation doesn't feel quite like the long-term consumer benefit Microsoft is making it out to exist. It's also worth because how much better off the industry might exist if Microsoft is forced to make serious concessions to get the bargain passed. On the other manus, Sony'south fixation on Call of Duty is starting to await more and more like a greedy, desperate death grip on a decaying business model, a status quo Sony feels entitled to clinging to.

"Should any consumers decide to switch from a gaming platform that does non requite them a choice as to how to pay for new games (PlayStation) to one that does (Xbox)," Microsoft wrote. "And so that is the sort of consumer switching behavior that the CMA should consider welfare enhancing and indeed encourage." The Activision Blizzard bargain at present depends on how convincing that argument is.

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