I am not an advocate of mergers. In general, I don’t believe that the world is better off when there are fewer and fewer companies at the top! But of all the reasons for blocking Microsoft’s $68.7 billion purchase of Activision Blizzard, I never dreamed that “we must stop Microsoft from dominating cloud gaming” would be the one.
But that’s exactly the door that regulators walked through on Wednesday, when Britain’s Competition and Markets Authority ruled that the deal “could change the future of the fast-growing cloud gaming market, leading to less innovation and less choice for UK gamers for years to come.” They are rejecting 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 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 sucks! Microsoft is being penalized because Google Stadia utterly failed, because Amazon Luna went nowhere fast, because Sony got sidetracked because Nvidia can’t stream your own purchased games to you without dealing with every publisher and developer under the sun.
It could die because EA, Verizon, and AT&T have mostly pulled out after realizing that the infrastructure costs to get it right didn’t justify weak demand from gamers and that — 5G or not — a phone isn’t a great replacement for a game console. It could die because Apple was so afraid of becoming a dumb pipe for cloud gaming that it arbitrarily invented new App Store rules that lock the iPhone.
With so little real competition, Microsoft’s xCloud looks dominant, especially considering Microsoft is lumping it in with every Xbox Game Pass Ultimate subscription — whose subscribers, for all we know, can try xCloud once and never again. (We have asked Microsoft to clarify the monthly active user numbers it has provided to the CMA who are not clear about this.)
Microsoft is a big fish in a tiny 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 has promised to sweeten the pot with huge concessions to other market participants. Did you know that Microsoft has promised to put all his PC games on every eligible cloud service there upon their releasej for 10 years if the deal goes through? Theoretically, Nintendo could have gotten its own servers call of Duty runs on Switch with Microsoft’s blessing. Even smaller cloud gaming providers would have had access.
Did you know that Microsoft had promised to shake up the entire business model and give every game owner the right to stream their own games to their own devices from the service of their choice, rather than the status quo for which Nvidia has to buy rights? the games you already own before it can stream them to you? That was also a 10-year promise:
Microsoft unilaterally grants to each consumer who has purchased or received a free license to play a PC game from an authorized third-party digital PC store (“Eligible Game”) a license to stream the game using a generally accepted PC cloud provider. Consumer Gaming Providers 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 promise could break the chicken-and-egg cycle by providing enough games to attract enough players to convince publishers to also make more games available for cloud gaming to offer services. “This period is long enough for cloud gaming to establish itself as a consumer service and for providers to secure a number of popular games,” Microsoft argued.
Mind you, Microsoft’s promises are pretty self-serving because they feed directly into Microsoft’s core business. If you want to stream Microsoft’s cloud PC games, you’d probably invest in Windows-based servers and possibly even Microsoft’s Azure cloud platform to handle the load, as Sony has explored a bit. They could also stop any plans to develop cloud games for Linux instead. Microsoft apparently planned this retain all earnings 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. There are few companies with the technology and know-how to run cloud games, Microsoft is one of the largest and the only one with a computing platform that game developers are actually targeting en masse. (Google reportedly pays developers tens of millions of dollars per game porting to Stadia’s Linux instead of Microsoft’s Windows to give you a feel for the uphill battle.)
For newcomers without an existing gaming console (including the games and the operating system), we have found that this catalog is most likely drawn from games currently available on PC operating systems, as these can be streamed from any cloud gaming service running on that operating system ( provided appropriate license agreements have been made). Therefore, these cloud gaming service providers either need a license for a proprietary PC operating system – for example Windows, the operating system for which most PC games are developed.
It might be difficult for Sony to compete with Microsoft in this space — although it’s Sony, not Microsoft, that bought the intellectual property of OnLive and Gaikai, bringing the patent collections of two cloud gaming pioneers under one roof.
The CMA says it believes so call of Duty “could make a significant difference in the success of a cloud gaming provider” and that over watch And World of Warcraft might help, but that’s why it is blocking the deal instead of letting it go.
But if Microsoft could show that cloud gaming is actually good business by offering a collection of games big enough to attract and keep gamers, it would be a first – and The could finally stimulate the investment the technology deserves.
Still, it’s never a good idea to take a company’s merger promises at face value. One of the main reasons the CMA is blocking the deal is because they don’t think Microsoft can keep their word:
The complexity of the remedy in the context of a dynamically evolving market also meant that it posed a high risk of circumvention and would have been difficult to monitor effectively. Given these shortcomings, we could not be sufficiently confident that the Microsoft Cloud Remedy would have addressed our concerns, and we determined that the only effective remedy against the SLC was 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 wouldn’t have to do something as dramatic as make call of Duty exclusively for its own cloud gaming service, the CMA fears. There are many technological pitfalls just waiting to be passed.
cloud gaming does work and can work great and give you an experience approaching that of a high-end gaming PC if everything goes right. But how it works depends on so, so many things – not just your internet speed, but WiFi congestion in your neighborhood, the physical distance of a company’s cloud gaming servers from your home, the peering Agreements and handshakes that take the bits all the way across the internet, delivering an image back to your screen, virtualizing the game controller you’re using, and so on.
I’ve been involved with cloud gaming for over a decade, since the days of OnLive and Gaikai, and I’m telling everyone now that the cloud gaming market isn’t going to take off until the friction goes away. However, this also means that Microsoft could create or not reduce friction for cloud gaming competitors in many areas over the next 10 years. Even if Microsoft isn’t intentionally sabotaging competing services, there are ways to inadvertently screw things up for those who depend on its platforms.
There are other technological issues that stand in the way of a dynamic cloud gaming market, not the least of which is the fact that most major games require companies to have an entire graphics card in a server room waiting for each individual player. Sony – which once kept a PlayStation 3 in a server room for each cloud player – is among those looking for a way to fix this. Now I’m wondering if Sony will bother now that Microsoft sees fewer opportunities at the same time And slightly less competitor.
#Microsofts #Activision #deal #life #support #cloud #gaming #sucks
