Will Microsoft Actually Close the Activision Deal?

The primary focus of this analysis is the regulatory landscape surrounding Microsoft’s proposed acquisition of Activision Blizzard, specifically addressing the U.S. Federal Trade Commission’s (FTC) December 2022 legal challenge to block the merger. The central thesis suggests that despite the FTC’s aggressive stance under Chairperson Lina Khan, the deal is likely to close because Microsoft does not currently hold a dominant position in the specific market segments identified by regulators, such as multi-game subscription libraries and cloud gaming.

The analysis highlights several key data points and industry developments from late 2022. It notes that the FTC’s complaint centers on the potential for a monopoly in high-performance consoles and subscription services. However, the counter-argument presented is that Microsoft’s competitors, such as Nintendo and Steam, have made independent business decisions not to compete in the subscription space, which should not necessarily disqualify Microsoft’s expansion. To mitigate concerns, Microsoft has reportedly offered Sony a ten-year deal to include Call of Duty on PlayStation Plus, signaling a willingness to make concessions to satisfy antitrust requirements.

Beyond the merger, the scope covers broader platform power dynamics, including an interview with Epic Games CEO Tim Sweeney regarding the mobile duopoly of Apple and Google. Sweeney argues that current app store models do not improve security but instead function as illegal monopolies that stifle direct distribution and payment competition. Additional industry data points include the PlayStation 5’s supply surge driving a 3% growth in U.S. video game dollar sales in November 2022 and the successful integration of Riot Games titles into Xbox Game Pass to drive user retention.

The methodology relies on qualitative analysis of legal filings, executive interviews, and market performance data from sources like NPD and SteamDB. The geographic focus is primarily on the North American and European markets during the fourth quarter of 2022, covering the console, PC, and mobile industry segments.