Microsoft’s plans to acquire Activision Blizzard for $68 billion have been met with controversy and regulatory scrutiny. Among the concerns raised is the potential anti-competitive impact of the acquisition, as well as the impact of Microsoft’s subscription services, Xbox Game Pass and Xbox Live Gold, on Activision’s traditional game sales.
In a recent report by the UK’s Competition and Markets Authority (CMA), it was revealed that Microsoft’s internal documents admit that Xbox Game Pass “would lead to the cannibalization of game sales.” This admission is significant as it indicates that Microsoft’s subscription-based services could decrease Activision’s regular game sales, which are currently a major source of revenue for the company. While Activision has considered making its games available on Game Pass, it has so far decided that doing so would “severely cannibalize B2P sales.”
However, the CMA report also states that multi-game subscription (MGS) services like Xbox Game Pass will likely remain a smaller part of console gaming offerings when compared to B2P games. This sentiment is echoed by Take-Two CEO Strauss Zelnick, who has said that subscription services are not significantly impactful and do not cannibalize his company’s core business. The CMA’s statements were made mainly in reference to Activision potentially adding Call of Duty and other titles to the Xbox Game Pass.
Despite the regulatory scrutiny, some analysts believe that the Activision Blizzard acquisition will ultimately happen. If the deal falls through, the CMA acknowledged in its report that Microsoft already has a “strong gaming ecosystem” consisting of consoles, subscription services, and 24 game development studios.
Xbox Game Pass has proven to be popular and successful among fans of Microsoft hardware, allowing gamers to play on a console, PC, or mobile with progress saved to the Xbox Cloud and accessible from any platform. While it has missed its subscriber goal for two years in a row, the service has still been successful in its own right.
There is no doubt that the gaming industry is in the midst of a major shift, with a subscription service like Xbox Game Pass growing in popularity. However, the impact of these services on traditional game sales is a subject of much debate. Proponents argue that subscription services offer greater value and convenience to consumers, while critics worry that they will lead to a decline in the quality and diversity of games.
As the CMA report highlights, this debate is particularly relevant in the context of the Activision Blizzard acquisition. With the potential inclusion of blockbuster franchises like Call of Duty on Xbox Game Pass, the impact on traditional game sales could be significant. As such, the debate over the future of gaming is likely to continue for some time to come.
