Microsoft Activision Deal and Why the FTC wants to Block It
On September 28, 2021, Microsoft announced that it had entered into a definitive agreement to acquire Activision, one of the world’s largest and most successful video game publishers, for a whopping $74 billion. The acquisition would bring together Microsoft’s Xbox gaming division and Activision’s portfolio of hit franchises, including Call of Duty, World of Warcraft, and Candy Crush, among others.
The deal was met with both excitement and concern. On one hand, the acquisition would give Microsoft access to Activision’s massive player base and IP portfolio, allowing the company to strengthen its position in the gaming industry and potentially increase revenue streams. On the other hand, many industry experts and consumers raised concerns about the potential negative impact the deal could have on competition and consumer choice in the gaming market.
As a result of these concerns, the Federal Trade Commission (FTC) announced that it would be challenging the Microsoft-Activision deal on the grounds of antitrust laws. The FTC is concerned that the acquisition would lead to a concentration of market power in the gaming industry, which would harm competition and ultimately lead to higher prices and less innovation for consumers.
Why the FTC is Concerned?
One of the main arguments put forward by the FTC is that the acquisition would give Microsoft a significant advantage over its rivals in the gaming industry. The company already has a strong presence in the market through its Xbox gaming division, and the addition of Activision’s IP portfolio and player base would further solidify its position. This, in turn, could lead to reduced competition and less innovation as other companies struggle to compete with Microsoft’s dominance.
Another concern is that the acquisition would lead to a reduction in consumer choice. Activision’s portfolio includes some of the most popular and successful video games in the industry, and the merger would give Microsoft control over a large portion of the market. This could lead to a situation where consumers are forced to purchase games from Microsoft, rather than having a variety of options to choose from.
The FTC also argues that the acquisition would harm small and independent game developers. Activision has traditionally been a major publisher for independent developers, and the merger could lead to a reduction in opportunities for these developers to get their games published and reach a wider audience.
In response to the FTC’s concerns, Microsoft has argued that the acquisition would actually benefit consumers and the gaming industry as a whole. The company claims that the acquisition would allow it to invest more in gaming and bring new and innovative games to market more quickly. Microsoft also argues that the acquisition would lead to more competition, not less, as the company would be able to compete with other major players in the industry, such as Sony and Nintendo.
As the FTC continues to review the Microsoft-Activision deal, it remains to be seen whether the acquisition will be approved or blocked. It’s important to note that the FTC’s primary responsibility is to protect consumers and ensure a fair marketplace, so it’s likely that the outcome of the review will be determined by how the acquisition would impact competition and consumer choice in the gaming industry.
Conculsion
In conclusion, the Microsoft-Activision deal has raised important questions about the impact of large acquisitions on competition and consumer choice in the gaming industry. While Microsoft argues that the acquisition would benefit consumers and the industry as a whole, the FTC has raised concerns about the potential negative impact on competition and consumer choice. The outcome of the review will likely depend on how the acquisition would impact the gaming market and whether it would ultimately harm or benefit consumers.
Joe is is a professional software engineer, CTO and technology innovation leader residing in the Atlanta suburb of Alpharetta. He is a published author of game development books and a leader in the technical innovation space.
