Quote from: Idas, post: 94167888, member: 111169
OK, that's very nice, you'll say. But why the hell acquiring a videogame publisher could have major anti-competitive effects in cloud services?
I guess that the line of thinking that they are following is similar to the one from the CMA:
- Videogames generate more money than other form of entertainment.
- But there are only 3 major competitors (MS, Nintendo and Sony) and no one has entered the (video game console) industry in the last 20 years. Not a good sign...
- In addition to that, the barriers of entry (level of investment) and the network effects (more users usually attract better content) are very strong.
- So, there is the minimum amount of competition in that market and it's very hard to get new entrants. That's not good!
- Luckily, PC and mobile are alternatives to play games beyond consoles. Well, that helps the market to be more competitive
- In any case, as other industries, the videogame sector is in a transitional phase from the classic "buy to play" to alternatives like subscriptions, cloud, etc.
- This transition is finally allowing more competition and new entrants (Apple, Amazon, Netflix, Google, Nvidia, Meta, etc). Finally, that's good news!
- But to be able to compite these new entrants also need good content and access to the cloud infrastructure that's going to be the basis of future developments.
- One of the 3 originals competitors in the industry (MS) has a good position in the market, a very popular subscription service, a strong first party offering, it's number 2 in cloud services in the world and number 1 with the operating systems used by PC (Windows). Not bad! That's already a lot of very good synergies.
- Suddenly, that competitor (MS) buys the biggest third party publisher in the world (ABK) with some of the biggest and most popular IPs in the industry (COD, Candy Crush, WoW, etc).
- What happens with the other two competitors (Nintendo and Sony)? Well, they have a better position in the industry (by number of sales, users and quality content). But if the industry is really transitioning to the cloud and subscriptions, although they offer some popular subscription services (PS Plus, for example), they don't have cloud infrastructure or an OS. Well then, to get access to them they'll have to pay for it.
- What happens with the new entrants? Well, some of them have cloud infrastructure an even an OS (Amazon or Google), but the gaming catalogue is very small and they don't have a lot of users. So, to attract new users they'll have to pay for popular content (Google) and probably cloud infrastructure or OS licenses as well.
Well, well, well... If the industry is already transitioning to subscription + cloud and one of the 3 main competitors (MS) already has: 1) a popular subscription service (Gamepass), 2) a good amount of users and sales (Xbox) 3) a strong first party offering (24 studios) 4) one of the biggest cloud infrastructure with Azure (so they don't have to pay for it) 5) the most important OS (Windows) in an alternative gaming market, PC (so they don't have to pay for it) and now 6) they are acquiring the biggest publisher in the sector with some of the biggest IPs on all the gaming markets (COD and consoles; WoW and PC; Candy Crush and mobile) they could really hurt competition, including new entrants and the ones already established (no access to the content acquired, worse and more expensive access to cloud infrastructure and OS licenses or very strong network effects).
Therefore, although MS is acquiring a videogame publisher the real question of the transaction is not if there will be more publishers, enough developers or alternative IPs post merger, it's about the transition of the industry to a new model and if this operation could seriously harm the most lucrative industry right now for present and future competitors.
That would be my theory of why there is so much focus on cloud services although ABK is the one being acquired. Of course, now MS has to prove with facts that the reality of the market is different and even with all of that to its favor, there will be enough competition in the short and long term.