I’m not a fusion apologist. I generally don’t think the world is better off with a shrinking number of 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 must stop Microsoft from dominating cloud gaming” would be the only one.
But that’s exactly the door regulators chose to walk through on Wednesday, when Britain’s competition and markets authority ruled the deal “could change the future of the burgeoning cloud gaming market, leading to less innovation and less choice for UK gamers.” than in the years to come.” They are denying a deal that was widely expected to be approved, leaving Microsoft and Activision Blizzard hanging on their hopes of a European Union decision next month.
I’ve read through hundreds of pages of documents, and most of the CMA’s arguments boil down to this: Microsoft is so dominant in cloud gaming today that it could control its entire future.
And I can’t help but laugh ’cause it means the deal could die, not because cloud gaming is thriving, but because cloud gaming still kind of sucks! Microsoft is being punished because Google Stadia totally failed, because Amazon Luna wasn’t going anywhere anytime soon, because Sony was distracted, because Nvidia can’t stream your own purchased games to you without negotiating with every publisher and developer under the sun.
It could die because EA and Verizon and AT&T mostly backed off after realizing that the infrastructure costs of getting it right didn’t justify the weak demand from gamers and that — 5G or not — a phone isn’t a good replacement for a gaming console. It could die because Apple was so terrified of becoming a dumb cloud gaming pipe that it arbitrarily made up new App Store rules locking down the iPhone.
With so little real competition, Microsoft’s xCloud looks like dominant, especially when you consider that Microsoft lumps it in with every Xbox Game Pass Ultimate subscription – whose subscribers, for all we know, get to try xCloud once and never again. (We’ve asked Microsoft to clarify the monthly active user numbers it provided to the CMA, which aren’t clear on that.)
Microsoft is a big fish in a small pond. And, paradoxically, the UK’s decision could help keep it that way.
The Activision Blizzard deal could have been the biggest shot in the arm for cloud gaming ever, as Microsoft promised to sweeten the pot with huge concessions to other players in the market. Did you know Microsoft promised to post everyone of his PC games each eligible cloud service upon their releasej for 10 years if the deal goes through? Nintendo could theoretically have set up its own servers Duty runs on Switch with Microsoft’s blessing. Smaller cloud gaming providers would also have had access.
Did you know that Microsoft had promised to turn the entire business model upside down, giving each game owner the rights to stream their own games to their own devices from the service of their choice, rather than that status quo where Nvidia rights must get on the games you already own before it can stream them to you? That was also a 10-year promise:
Microsoft unilaterally grants a license to any consumer who has purchased or obtained a PC game to play a PC game through an authorized third-party PC digital store (“Eligible Game”) to stream the game using a generally recognized PC consumer cloud gaming provider to a device they own (the “Consumer License”). Microsoft grants the Consumer License by posting it on Microsoft’s website. The Consumer License is granted for the Term.
Nvidia’s GeForce Now boss told me that a 10-year pledge could break the chicken-and-egg cycle by offering enough games to attract enough gamers to convince publishers to also provide more games to cloud gaming services. “This period is long enough for cloud gaming to establish itself as a consumer service and for providers to secure a range of popular games,” Microsoft argued.
Mind you, Microsoft’s promises are pretty selfish because they flow right back to Microsoft’s core business. If you wanted to stream Microsoft’s cloud PC games, you’d probably need to invest in Windows-based servers and possibly even Microsoft’s Azure cloud platform to handle the load, as Sony has been exploring for a while. You can also cancel plans to build cloud games for Linux instead. Microsoft apparently intended to do so keep all revenue from game sales and in-app purchases instead of also sharing them with competing cloud providers.
And the CMA makes some very good points about barriers to entry. Few companies have the technology and know-how to enable cloud gaming, Microsoft is one of the largest and it’s the only one with a computing platform that game developers are massively targeting. (Google reportedly paid developers tens of millions of dollars per game to port to Stadia’s Linux instead of Microsoft’s Windows, just to give you an idea of ​​the uphill battle.)
For newcomers without an existing game console (including the games and operating system), we found that this catalog is likely from games currently available on PC OS, as they can be streamed from any cloud gaming service running that operating system (provided that there are adequate licensing arrangements). As such, these cloud gaming service providers either require a license for a proprietary PC operating system, such as Windows, the operating system for which most PC games are designed.
It can be difficult for a Sony to compete with Microsoft in this area – even though it’s Sony, not Microsoft, that bought the IP of OnLive and Gaikai, bringing the patent collections of two cloud gaming pioneers under one roof.
The CMA says it believes it Duty “could make a real difference to the success of a cloud gaming provider” and that Overexpected And World of Warcraft could help, but that’s why it is to block the deal instead of letting it go through.
But if Microsoft could show that cloud gaming is actually a good thing by offering a large enough collection of games to attract and retain gamers, it would be a first – and That could ultimately drive the investment the technology deserves.
Still, it’s never a good idea to take a company’s merger promises for granted. One of the biggest reasons the CMA is blocking the deal is because it doesn’t think it can take Microsoft at its word:
The complexity of the remedy, in the context of a dynamic and evolving market, also meant that there was a high risk of circumvention and it would have been difficult to monitor effectively. In light of these shortcomings, we could not be confident enough that the Microsoft Cloud Remedy would have addressed our concerns, and we have found that the only effective remedy against the SLC is to prohibit the Merger.
And I agree that it would be all too easy for Microsoft to subtly poison its promise if it wanted to.
Microsoft doesn’t have to do something as dramatic as create Duty exclusive to its own cloud gaming service, as the CMA says it fears. There are plenty of technology trip ups waiting to happen.
Cloud gaming do 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 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 needed to get the bits all over the internet delivering an image back to your screen, the virtualization of the game controller you’re using, and so on.
I’ve been into cloud gaming for over a decade, ever since from OnLive and Gaikai, and I’m telling everyone now that the cloud gaming market won’t take off until the friction is gone. But that also means there are a lot of places where Microsoft could create friction, or fail to mitigate friction, for cloud gaming competitors over the next 10 years. Even if Microsoft isn’t deliberately sabotaging rival services, there are ways it can accidentally screw things up for those who end up dependent on its platforms.
There are other technology issues that still stand in the way of a vibrant cloud gaming market, not least because most major games require companies to have a full graphics card in a server room for every player. Sony – which once kept a PlayStation 3 in a server room for every cloud player – is among those looking for a way to fix that. Now I wonder if Sony will bother now that Microsoft looks less likely at the same time And slightly less competitive.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.