Microsoft’s $70 billion deal to buy a game publisher was denied by the U.K

Is Microsoft really breaking the cloud gaming paradigm? The competition and market authority’s final report of the Activision Blizzard merger

I am not a merger apologist. I don’t think the world is good off with a lot of smaller companies at the helm. But of all the reasons to block Microsoft’s $68.7 billion purchase of Activision Blizzard, I never dreamed that “We need to stop Microsoft from dominating cloud gaming” would be the one.

The Competition and Markets Authority said in its final report that “the only effective remedy” to the substantial loss of competition “is to prohibit the Merger.” The companies have vowed to appeal.

The all-cash deal faced stiff opposition from rival Sony and was also being scrutinized by regulators in the U.S. and Europe over fears that it would give Microsoft control of popular game franchises like Call of Duty, World of Warcraft and Candy Crush.

The Activision Blizzard deal could have been the biggest shot in the arm for cloud gaming ever because Microsoft promised to sweeten the pot with huge concessions to other players in the market. If the deal goes through, Microsoft will put every one of its PC games on every eligible cloud service for 10 years. Nintendo might have set up a server to allow for Call of Duty on the Nintendo Switch. Smaller cloud gaming providers would also have had access to that.

“We remain fully committed to this acquisition and will appeal,” President Brad Smith said in a statement. He said that the watchdog’s decision discouraged tech innovation and investment in the United Kingdom.

“We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works,” Smith said.

The watchdog review of Microsoft’s proposals found that they would require its oversight but it was found that allowing the merger to go forward would allow cloud gaming to develop without intervention.

It was the biggest cash deal in tech, and it wasn’t just about buying titles that would help move Xboxes. On one level, it was a way to underpin Microsoft’s move beyond the console, to become a “Netflix for games” that meant customers were no longer tethered to a single device, but bought into a gaming ecosystem on the cloud. It was more than that. The acquisition will have a key role in Microsoft’s metaverse platforms, according to the company’s CEO.

Steven Weber is a professor at the UC Berkeley School of Information and he says that the technology that allows players to play games is similar to the technology that allows a process engineer to walk through a virtual oil refinery. To be good at gaming you need to be good at the metaverse.

Microsoft’s xCloud deal isn’t going to happen, but it could stop the Microsoft cloud-gaming-loss remedy

Microsoft wouldn’t need to do something as dramatic as make Call of Duty exclusive to its own cloud gaming service, as the CMA says it fears. There are many technological trips up that are waiting to happen.

With so little real competition, Microsoft’s xCloud looks dominant, particularly when you consider that Microsoft lumps it in with every Xbox Game Pass Ultimate subscription — whose subscribers may, for all we know, try xCloud once and never again. (We’ve asked Microsoft to clarify the monthly active user figures it provided to the CMA, which aren’t clear about that.)

The games that can be streamed from cloud gaming services that run PC OS are the most likely candidates for this catalog, as they can be played on a computer without having to purchase a gaming console. As such, these cloud gaming service providers will either have to pay a license fee for a proprietary PC OS or Windows that most PC games are designed for.

There are other technological issues still standing in the way of a vibrant cloud gaming market, not least of which is how most big games require companies to have an entire graphics card waiting in a server room for every single player. Sony used to have a PS3 in a server room for cloud players, and is now looking for a way to fix that. Now, I wonder if Sony will bother now that Microsoft is simultaneously looking like less of an opportunity and slightly less of a competitor.

Still, it’s never a great idea to take a company’s merger promises at face value. One of the biggest reasons the CMA is blocking the deal is because it doesn’t think it can hold Microsoft to its word:

It would have been difficult to monitor effectively, and it had a high risk of circumvention, due to the complexity of the remedy. We did not believe that the Microsoft Cloud Remedy would address our concerns and so we concluded that the only effective remedy was to prohibit the Merger.

Source: https://www.theverge.com/2023/4/27/23699879/microsoft-activision-blizzard-merger-cma-cloud-gaming-loss-editorial

Cloud Gaming: What Does It Take To Get You There? How Does It Depend on Your Internet Speed, Peering, and Controller Configuration

Cloud gaming does work and can work brilliantly, giving you an experience approaching that of a high-end gaming PC when everything lines up. But it depends on so, so very many things to work that way — not just your internet speed but the Wi-Fi congestion in your neighborhood, the physical distance of a company’s cloud gaming servers from your home, the peering arrangements and handshakes that take the bits all the way across the internet and deliver an image back to your screen, the virtualization of the game controller you use, and so on.