Sunday, October 2, 2022

Google met with EU Commission officials, tries to do to Microsoft's acquisition of Activision Blizzard what it just did to Stadia--and what Google really fears is open app markets

This is a follow-up to Merits must matter: European Commission, formally notified of Microsoft-ActivisionBlizzard deal today, schedules Phase 1 merger review decision for November 8.

Deal Reporter, a subscription-based news service that reports on developments surrounding mergers and acquisitions (and, particularly, the related regulatory approval processes), has identified two active complainants over the $70B transaction: Sony, whose PlayStation chief reportedly flew to Brussels for a September 8 meeting with the European Commission's Directorate-General for Competition (DG COMP), and Google.

Right: Google. The fact that the search engine monopolist just lost its appeal of the European Commission's Google Android ruling doesn't deprive it of the right to complain about others. But the question must be asked whether Google is advocating competition and choice, or much rather trying to use the regulatory process to protect one of its monopolies--specifically, the Android game distribution monopoly. (I'm using the term "monopoly" here as it's understood in the U.S.; the EU equivalent is "dominant market position.")

That would constitute a parallel between Sony--the undisputed market leaders in video game consoles thanks to its PlayStation--and Google. Two market leaders, united in their opposition to one merger.

In the public redacted version of its submission to Brazil's antitrust authority (CADE), Sony described Activision's Call of Duty as a must-have product and suggested that it forms a market in its own right. In its response, Microsoft said Sony notoriously acquired "blocking rights" to preclude game publishers from making titles available on other console platforms than the PlayStation. Google, however, did not voice any criticism of the deal in the public version of its filing. Instead, Google's Brazilian filing said there are other players than Microsoft and Activision Blizzard that are capable of developing "AAA" titles. Google listed EA, Ubisoft, Sony, Take Two, and Nintendo. It's attributable to the ongoing Epic Games v. Google litigation that Google didn't mention Epic (or Tencent) in this context.

While Sony argues that Call of Duty plays in a league of its own, Google told the Brazilian regulator that other games "can be considered similar in terms of quality and genre," such as Battlefield 2042 (EA), Halo Infinite (Microsoft), Tom Clancy's Rainbow Six Siege (Ubisoft), and Counter Strike: Global Offensive (Valve). Google also lists several competitors for each of Activision Blizzard's other major titles.

Google's submission mentioned its Stadia game streaming service, which it didn't launch in Brazil--and which Google will discontinue as it announced this week. As a result, Google is no longer concerned about its ability to compete with Microsoft in the game streaming market. In that Brazilian filing, Google noted that various companies (of which it mentions Microsoft's Xbox Game Pass, Nvidia's GeForce Now, and Amazon Luna) have entered the digital game distribution market in recent years "with different levels of success."

It certainly didn't help Google that Apple didn't allow the iOS Stadia app to provide actual gameplay (as Apple insists that each title must go through Apple's App Store review as a separate offering), but that affects all Google rivals except Apple Arcade, and--as I noted on Twitter--Stadia would probably have failed anyway. Industry experts already identified various shortcomings of Stadia in 2019, and those weren't (and now are never going to be) addressed, including (but not limited to) the fact that the base subscription fee granted players access to only a few--and not overly appealing--titles, while Google wanted to charge amounts well north of $50 for new quality titles such as Far Cry 6 or Red Dead Redemption 2. And players couldn't even find out about those title-specific prices until they signed up.

Observers also felt that Google's commitment to Stadia was weak, as the company's marketing spend on Stadia appeared small. The doubters have been vindicated by Google's ultimate lack of perseverance.

Google has a history of abandoning projects. The KilledByGoogle website displays tombstones for roughly 300 offerings that Google has already discontinued (or has announced that it would discontinue soon, such as Stadia). Even this blog got affected by Google's habit of killing projects: until the summer of 2021, Google's FeedBurner service delivered this blog's daily email digests to subscribers. But Google stopped that email delivery service, so FOSS Patents, like many other blogs, had to migrate to another service (I chose, which has room for improvement but, all in all, represents an improvement over FeedBurner).

So what is Google really concerned about?

I'm sure that the primary reason why Google would like regulators to prevent Microsoft from consummating the acquisition of Activision Blizzard is that Microsoft intends to open up mobile game distribution.

Microsoft has set up a webpage related to the Activision Blizzard transaction. The objectives laid out on that web page include some that Google obviously dislikes:

  • "[D]evelopers deserve more options to build, distribute and monetize their groundbreaking games."

  • "Choice in how and where people buy games with subscription and one-off purchase options"

  • "For the 95% of gamers who play on phones, alternatives to gaming offerings from the dominant mobile platforms"

  • "Better revenue and fair marketplace rules through our app store principles" (which Microsoft already announced earlier this year)

  • "Greater flexibility in payment systems and the experience they provide their fan"

  • "More competition in mobile, where a couple of big players dominate"

Every single one of those items is anathema to Google. But every single one of them is also totally in line with the European Union's policy goals concerning mobile app distribution. And every single one of them is in the interest of small app makers like me, especially as I experienced in 2020 how unsustainable Google's and Apple's app review tyranny is.

In order to improve the situation in the mobile gaming space, Microsoft needs a critical mass of mobile games, and that's what its acquisition of Activision Blizzard would ensure.

It would be much better if Google and Sony could meet with the European Commission to discuss how they're going to grant developers fair, reasonable, and non-discriminatory access to their platforms.