The Six Five team discusses FTC filing suit to block Microsoft activision deal.
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Transcript:.
Patrick Moorhead: FTC filing suit against Microsoft about its Activision deal.
Daniel Newman: All right, Pat. Well, let’s do a little bit more of a story and a little bit less news here. We do say that we’re less news and we’re more analysis. So, over the last few years there’s been a bit of a market narrative that Microsoft is somehow able to always escape scrutiny when it comes to antitrust. Well, never more. The company has made this deal, and I want to be transparent about my position. I came out early when this deal was announced and I said, “I think it will go through.” I was about 95% positive on it. After the FTC block, I’m now sitting at more like 70% positive.
Now to some extent, I think the FTC is responding to this broad criticism that is received for not actually challenging Microsoft. Part of the reason it hasn’t challenged Microsoft has had to do with the fact that a lot of Microsoft’s deals are enterprise focused and enterprise just doesn’t get above the radar nearly as much as consumer stuff does. So if it’s impacting consumers directly, the FTC tends to take a bigger stance than when things are more of a business to business solution, which is still the largest part of the Microsoft portfolio.
There are a lot of gaming companies, and by the way, there’s a lot of options for how people game. So why would the FTC really take note of this? On the console side, you’ve got Microsoft, you’ve got Sony, you’ve got Nintendo, but of course console gaming is only a part of the business. You’ve got console gaming, you’ve got PC and desktop gaming, and then of course you have mobile gaming. So, people have a lot of choice. It’s not like one of these situations where you have two choices. However, Microsoft is in a situation where if they start to control a lot of the content, that can become a problem beyond the console, it starts to become a problem on the desktop, it starts to become a problem on the mobile devices.
I think a lot of the worry here is with Activision being one of the big game slayers that has some of the biggest titles, is that Microsoft could use this to control some of the pricing or availability of games they do. So games like Call of Duty, which are now available on any console and there are different versions of the gaming available on mobile and on pc, they could suddenly say it’s only available on this. Or they give pricing advantages or feature advantages that might go to certain users that are using Microsoft hardware or Microsoft gaming services and they wouldn’t pass those on to the rest of their community. There has already been some concern, I believe due to past acquisitions. Pat, I don’t remember which game it was, but there was a game where they basically told Europe that this wouldn’t be an issue and now they’re starting to have some exclusive titles. So there was a little bit of this did they go back on their word? I’m going to try to find which one that was. I was reading about it yesterday.
Overall though, Pat, here’s what my takeaway on it is, of all the things that our FTC needs to be focused on, this to me does not. You remember when Chamath said on the All-in pod, “This is below my line,” and he was talking about something actually really important? This is not that important. Of all the things, you look at the app store on Apple and you say we’re not regulating that, but we’re worried about how a gaming company might use competitive content that they own to create monopolies. I just say, is this a wag the dog moment? Is this really the most important thing that our FTC could be using to litigate is whether or not Activision and Call of Duty is unfairly being distributed to Microsoft gamers versus people who use Sony?
I don’t know Pat. Long story short, the gaming industry’s huge. People have tons of choices, there’s tons of titles. If you don’t want to play Call of Duty, there’s other shooter games that you can play on other consoles. It seems to me like this is a little bit of a let’s do something to Microsoft to make everyone happy. Meanwhile, Tim Apple is going to just continue to charge 30% and make everybody’s life miserable that doesn’t want to use the Apple Store. So, sorry, I know I’m diatribe, but off I go.
Patrick Moorhead: So everybody knew it was going to be trouble when Lina Kahn came in to head up the FTC. She’s pretty active on Twitter and she’s been pretty active in her beliefs. So, we knew what would happen when we came in. Now when she first came in, there was some instant scrutiny on even past deals, for instance, between Instagram and Facebook. Then that went to scrutiny of now Meta trying to buy an MR or an XR company. So that people knew, it was a bigger company buying a smaller company. Make no mistake, Activision and Microsoft are very much large companies out there. Activision is not a startup. In fact, if you go back and look at the titles, it’s over 30 years old. So, we’re not talking about a bigger company buying a big company, not a huge company buying a small company, that’s different.
What also continued across the Obama administration was also this view of not what the numbers are today, but what could happen in the future. That’s a big challenge. Heck, we saw that in the Qualcomm lawsuits, which it’s not about consumer harm, it’s not about what they did, because the lawsuit was about 4G. But somehow it was here’s what Qualcomm could do on 5G. Thankfully, cooler heads prevailed, and IP protection was in the end decided upon. So, Microsoft already has come out and said for Sony I’m going to make certain titles available for a decade, I think it was Call of Duty that they said.
I don’t think this is an indication that the deal gets killed. I think this is an indication that there will be some official ring fencing on how the company operates and goes forward. Microsoft is digging in on this one and they’re not just going to go away. I do think it’s ironic that Microsoft and its employees actively help the administration that is about to block this. But hey, that’s more of an editorial than anything else. There are implications, folks, on the people that you give money to as employees and companies to get into office. You are looking at one of these right now. Dan, did you want to do a follow-up on that one?
Daniel Newman: No, I actually just thought that was great analysis. They’re going to dig in. To your point though, I think everybody out there, this isn’t over. This is not over. I still weigh it 70/30 it gets done. What’s your weight? Give me a guess.
Patrick Moorhead: I’m probably at 75/25.
Daniel Newman: All right. So we’re both driving the camp though that they’re going to fight through this and it’s still going to happen, which means there’s a lot of arbitrage out there for people that have some gall. Although it’s not advice, just want to make that clear.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
