Thursday, August 11, 2022

Sony, apparently the sole complainant about the Microsoft-ActivisionBlizzard deal, has credibility problems due to exclusive deals with game studios and cross-platform taxation

Microsoft and Activision Blizzard announced a merger agreement in January, followed in February by a Microsoft statement on app store principles. The merger is now being reviewed by competition authorities in various jurisdictions. In most places, the record is kept confidential, but

I haven't digested all of the documents. It's a slow process since I'm not fluent in Portuguese; just in Spanish, which is similar enough that one can get the message and just occasionally has to look up a word. It does, however, appear that other industry players, from a local hero like digital games store Nuuvem to the Apples and Googles of the world don't see serious issues that would counsel against clearance--the sole exception being Sony.

While others say there's still going to be enough competition in the games market post-transaction, Sony takes outlier positions such as suggesting that Call of Duty is a single-product market. There can be a single-brand aftermarket, but the notion that any entertainment product with loyal fans constitutes a market of its own obviously cannot be the applicable legal standard.

Sony is trying to make some sort of a foreclosure argument even though Microsoft has made it clear that Call of Duty will remain available across the major platforms. Now, in a filing made on Tuesday (PDF), Microsoft's Brazilian lawyers address, inter alia, Sony's claims--and not without highlighting that Sony is "isolated" among respondents to a CADE questionnaire.

The following passage, which refers to "blocking rights" Sony acquires to preclude game publishers from making their titles available through Microsoft's Game Pass subscription service, has drawn some attention (click on the image to enlarge; the red arrow was obviously added by me):

Some people say the related information about Sony's contracts came to light thanks to last year's Epic Games v. Apple trial (in my previous post I just reported the appellate hearing date). I'm not 100% sure. What definitely was discussed in the Fortnite case is the fact that Sony is even more restrictive than Apple in some ways, such as by taxing cross-platform play. That fact is also inconducive to Sony's credibility as an advocate of cross-platform software publishing. It's furthermore true that an agreement between Sony and Capcom concerning the Resident Evil 8 game was leaked in April 2021, and the Fortnite trial took place the following month, but that may be a coincidence. In any event, here's the relevant passage (click on the image to enlarge):

Subscription services and game stores like the Epic Games Store--Sony is an Epic shareholder by the way--do (often time-limited) exclusive deals all the time; Apple even says in its Brazilian filing that all Apple Arcade games are exclusives, though Apple made none of them itself. The question of whether such a deal is ultimately in the interest of consumers can only be answered on a case-by-case basis. It's just that Sony isn't about promoting competition and consumer choice. Let's put it that way.

Also this week, GameRant published an article according to which Sony's own subscription offering is years behind Game Pass, which according to the game-specialized website "was revolutionary for the gaming industry" when it launched in 2017. Sony should try harder to compete on the merits instead of making filings with regulators just to delay a merger with respect to which no one--neither a competition authority nor a competitor--has presented a credible theory of harm so far.