The Six Five team discusses Microsoft CMA and the State of Regulation.
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Transcript:
Patrick Moorhead: The Activision deal was blocked by the UK CMA. Dan, why don’t you take this one?
Daniel Newman: Well, I mean look, where innovation goes to die. See, where innovation goes to be taxed is the European competition with Ms. Vestager. And where innovation and M&A goes to die now seems to be the UK. First it was… Which one was it? NVIDIA got blocked there with ARM. VMware is now getting tied up with Broadcom in the UK at CMA. Another CMA is saying that cloud gaming could be dominated by Microsoft if they were to acquire Activision because of a couple of very respect… I think it’s Call of Duty. Is that the big one?
It’s a little embarrassing. I’m not a gamer. I’m going to admit this, it’s going to be embarrassing, but I’m not a gamer. But I mean look, this is one I just want to talk about is Pat, I don’t get it. I don’t get it. Who else is in gaming? Okay, I mean, I’m just thinking about this. You got Sony. Google has a gaming offering. You’ve got NVIDIA. GeForce has a streaming gaming offering. I mean just like you name off those three and you’re like, that’s at least three massive companies with tons of financial capability to offer gaming. And then you have a whole market of mobile gaming, which has very little to do with this. And one of things is how in the world do you really think this is going to truly block and create a lack of competition in the particular space? Plus, I believe that Microsoft already had come out and made a ton of concessions. It was already starting to, as in part of the process, this make their games available on more devices and make it more accessible. They were trying to get out in front of this one.
To me, it almost feels like right now this is a little bit of a relevance play, like the UK’s relevance after Brexit. What is our role in innovation? And to basically come out and say we’re going to block every deal because it comes across our desk. Now granted, looking back in arrears, Pat, I could have made a case for NVIDIA and Arm to be together based on the chip’s situation. You probably could argue that it probably may be for the best that Arm goes at it alone to make sure that there is… Especially if you see the movement of AI. So maybe they got that right.
But here’s the other problem I have, Pat, is how much are we regulating what might happen versus how much are we regulating what has happened? Because as far as I know, the mandate of our regulators when it comes to these things is not to predict what might happen in the future. What’s possible to happen. Because you could say in any case, every deal could be blocked for that reason about what might happen in the future. You have to look at current situation, market share, competition, consumer harm. And like I said, I never understand this, but it’s always to me is like so Apple can have an app store where they can charge the most significant tax on the planet and make nothing available to anybody without paying that toll. But in a market where there’s at least four or five major competitors that have the opportunity to compete, they’re going to say that this deal…
So I don’t know if I’m as angry or frustrated about the UK blocking this deal as I’m with them blocking all deals. And we talked a lot. You and I have talked to ad nauseam about the Broadcom deal with VMware, but Pat, with open source, public clouds, hybrid offerings, besides the fact that customers might have to make a decision to switch if they don’t like the new owner, if they don’t like the offering, there’s a thousand freaking options to go open source with virtualization and hybrid cloud, multi-cloud offering. So I know I’m kind of pivoting around the gaming thing, Pat, but that’s what it is to me is I can’t understand what are we regulating here? Are we regulating what might happen in the future? To me, that’s the wrong thing. And again, competition committees, here we are focused on the wrong things. I hope it’s for more than relevance, but I really don’t see what blocking this deal does to help the consumer or to increase competition in this particular market space.
Pat Moorhead: Yeah, I mean I’m concerned overall with the state, and I know they’re different between antitrust and IP protection. These are two fundamental things that keep the wheel of innovation going and theoretically were put in there to protect consumers from harm. But a couple trends that disturb me a lot, this shifting from actual consumer harm to theoretical consumer harm. We saw this with Qualcomm. We’re seeing this with Vmware, and we’re seeing this with Adobe Figma. Big is bad, regardless of any other variable. We’re seeing this in the UK, EU, US, and certainly China. And if you’re big, you’re bad. I mean, heck, they’re trying to unwind… The FTC wants to unwind the Instagram acquisition from Facebook, and that’s just laughable.
Again, when you have companies that are wantonly anti-competitive, like Apple, and nothing is happening to them. So the other thing that’s a challenge is the regulators with zero business experience, and I’m seeing this in the US and the UK. And what this does, this leads to misjudgments on what’s really important and what’s not. A great example of this is with Broadcom where there’s this notion that there’s going to be foreclosure on a $500 nick when Broadcom can make $10,000 on a VMware license. That’s dumb. That basically means you don’t really understand business and you don’t really understand tech.
And I think the other one is Adobe Figma, where Adobe and Figma are in completely different markets and people just don’t understand that. They can’t see or understand the separation between the two markets and what the two companies are offering. Just causes a tremendous amount of churn and wasted tax dollars. Adobe is all about creativity and Figma is all about ideation. Very different. You talked about countries using this as a tax, and we saw this with Qualcomm big time, EU, China and Korea. They want their pound of flesh and if they can’t get it through real taxes, they’re going to get it through penalties and fines.
So yeah, I’m concerned. And none of this is good for innovation. None of this is good for lowering costs and venture investments. I’ll leave you one final thing. Why would venture capitalists fund companies that could have a nearly impossible time of getting acquired at the rate that they currently are doing today? Well, they’re not. And just like IP creators aren’t going to be paying or investing in IP if they can’t protect that IP. So antitrust IP, we are in a very sad state of affairs. I’m going to be writing a lot more about the antitrust stuff in the future.
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.
