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Hullo, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Fri, we're taking a look at Microsoft and Sony's increasingly biting feud over Phone 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 send

For Microsoft's Activision Blizzard conquering, the fate of Call of Duty is starting to look less similar a bargaining flake and more similar a deal breaker. On Wednesday, the U.K.'s Competition and Markets Dominance, i of three pivotal regulatory bodies arguably in a position to sink the conquering, published a 76-page report detailing its review findings and justifying its decision final month to motility its investigation into a more in-depth second phase.

Microsoft hitting dorsum — hard — and defendant the CMA of parroting the talking points of its prime competitor, Sony. But the Xbox maker has exhausted the number of different ways it has already promised to play squeamish with PlayStation, especially with regards to the exclusivity of time to come Phone call of Duty titles. Unless Microsoft is able to satisfy Sony's ambitious demands and appease the CMA, it now looks like the U.M. 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 marketplace, the game subscription market place, and the deject gaming market. The regulator's report, which information technology delivered to Microsoft concluding calendar month but merely just made public, goes into item well-nigh each i, and how games as large and influential every bit Telephone call of Duty may requite Microsoft an unfair advantage.

"The CMA is concerned that having full control over this powerful catalogue, especially in light of Microsoft'south already strong position in gaming consoles, operating systems, and cloud infrastructure, could result in Microsoft harming consumers past impairing Sony's — Microsoft'southward closest gaming rival — ability to compete," the report said.
The CMA said information technology'southward also concerned about "other existing rivals and potential new entrants who could otherwise bring salubrious competition through innovative multi-game subscriptions and cloud gaming services."
"The CMA recognises that ABK'south newest games are non currently available on any subscription service on the mean solar day of release merely considers that this may alter every bit subscription services keep to grow," co-ordinate to the study. "After the Merger, Microsoft would gain control of this important input and could use it to harm the competitiveness of its rivals."
In other words, if Microsoft owned Telephone call of Duty and other Activision franchises, the CMA argues the visitor could use those products to siphon away PlayStation owners to the Xbox ecosystem by making them available on Game Pass, which at $10 to $xv a calendar month can be more bonny than paying $60 to $lxx 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, similar early access to multiplayer betas or unique bundles of in-game items.

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

The CMA "incorrectly relies on self-serving statements past Sony, which significantly exaggerate the importance of Call of Duty," Microsoft said. The visitor also defendant the CMA of adopting positions laid out by Sony without the "appropriate level of disquisitional review."
Microsoft reiterated many of the points information technology'south fabricated since the bargain was appear in January, including its commitment to release Call of Duty games on PlayStation for "several more years" across Activision's existing agreements, a concession PlayStation chief Jim Ryan said last month was "inadequate."
In its statement, Microsoft said taking Phone call of Duty away from PlayStation players would "tarnish both the Call of Duty and Xbox brands," and implied that Sony, as marketplace leader, does not demand the franchise to go along dominating the panel space.
"The proffer that the incumbent market leader, with clear and enduring market ability, could exist foreclosed past the third largest provider every bit a result of losing access to one title is not credible," Microsoft said. "While Sony may not welcome increased competition, it has the power to conform and compete."
Microsoft also went to great lengths to play down its position in the gaming market, a tactic that while strategically necessary does also feel dishonest.
Microsoft said it was in "last identify" in the console race, "7th place" in the PC market, and "nowhere" in mobile game distribution.
In Baronial, Microsoft said pulling Phone call of Duty from PlayStation would be unprofitable, and in this contempo filing information technology claimed that Sony would still have a larger install base than Xbox if every single Call of Duty role player on PlayStation switched to Microsoft's ecosystem.
In a secondary issues statement released Friday, the CMA responded to some of Microsoft's complaints and said the company was non fairly representing the incentives it might have to use the deal to "preclude" 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 effectually the earth, but in many ways the tactics it says it fears Microsoft may use if information technology owns Activision Blizzard are the very aforementioned tactics Sony has relied on for many years.

Sony'south leading market position is due in part to the company's first-party studios, many of which it acquired, and the exclusive games they produce.
Sony also has for years paid Activision Blizzard for exclusivity rights to certain elements of yearly Phone call of Duty games (similar early access to betas); that's the very same contractual agreement Microsoft said it will award if the bargain goes through.
Nevertheless at the same time, Sony is telling the CMA it fears Microsoft might entice players away from PlayStation using similar tactics. "According to SIE, gamers may await that CoD on Xbox will include extra content and enhanced interoperability with the console hardware, in addition to whatsoever benefits from membership in [Xbox Game Pass]," the CMA report said. "SIE submitted that these factors are likely to influence gamers' choice of console."
Sony, of class, has reason to be worried. Call of Duty is a major revenue-driver on PlayStation because of the panel'southward large install base of more than than 150 1000000 units.
But beyond that, Microsoft'south strategy of acquiring studios, putting more games on its subscription platform, and supporting game streaming is undermining Sony'southward business model. It may also exist true that Microsoft is simply and so big and its pockets and then deep that it's the only company that can afford this strategy.
Sony has begun to respond to the irresolute market, but slowly and often half-heartedly. Many of the Xbox ecosystem's nearly attractive features — like existence able to buy a game on Xbox and play it on PC, or streaming Game Pass games to multiple screens — are nonexistent in the PlayStation ecosystem, and Sony has made clear it has no desire to change that.
Sony'south position on some of these policies, and its feet-dragging response to subscription and deject gaming and cross-platform play, suggests to me information technology would rather regulators stop Microsoft'southward advances than have to defend its ain platform through competition.

Picking sides in this increasingly bitter feud is no easy task. Microsoft does indeed offer platform perks Sony does non, and we can imagine those perks extending to players of Activision Blizzard games if the bargain goes through.

Simply Microsoft is also ane of the earth's largest corporations, and praising such jumbo manufacture consolidation doesn't feel quite like the long-term consumer benefit Microsoft is making it out to be. It'southward also worth considering how much better off the industry might exist if Microsoft is forced to make serious concessions to get the deal passed. On the other hand, Sony's fixation on Call of Duty is starting to await more and more like a greedy, desperate expiry 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 not give them a option as to how to pay for new games (PlayStation) to i that does (Xbox)," Microsoft wrote. "So that is the sort of consumer switching behavior that the CMA should consider welfare enhancing and indeed encourage." The Activision Blizzard deal now depends on how disarming that statement is.

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