Microsoft x Activision: UK regulators become The Terminator?

Not expected. Also: some interesting Switch survey data & lots more platform news.

[The GameDiscoverCo game discovery newsletter is written by ‘how people find your game’ expert & company founder Simon Carless, and is a regular look at how people discover and buy video games in the 2020s.]

Hey, it’s definitely Wednesday! And there’s a lot of stuff going on out there in the wild world of game platforms and discovery. In fact, just as Activision releases a very impressive earnings report, we hear there’s news involving them and.. Xboy? Ybox?

As well as getting into that, we’re happy to showcase some interesting Switch user survey data. Not to mention a bunch more platform and discovery news. So let’s get stuck in….

[REMINDER: we just introduced our best deal of 2023 so far on GameDiscoverCo Plus. Get 30% off access to our extra weekly newsletter, Steam pre-release data back end, Plus-exclusive Discord to chat with your peers, and more… your help is much appreciated.]

Microsoft x Activision: the UK terminates the deal?

We were stretching for a metaphor to run alongside today’s UK Competition & Markets Authority’s announcement about the Microsoft x Activision deal. And then we remembered The Terminator - the original 1984 James Cameron movie.

Look, it’s relevant in two ways. Firstly, because a ‘deal termination’ just took place (ha ha). And secondly, for time travel reasons we’ll get into. So let’s get to the announce:

“The CMA has prevented Microsoft’s proposed purchase of Activision over concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”

Yes, this is a big surprise, and affects the global deal closing. It seems way trickier for Microsoft to close now, because you can’t just exclude the UK from playing ATVI games. (Although Michael Pachter’s one weird suggestion that Game Pass specifically could exclude Activision titles in the UK is worth rolling around the palate.)

And no, we weren’t expecting this. In fact, we ran a newsletter just last week on the difficulty of defining the cloud gaming market, saying: “since the definition of cloud gaming is muddled, it looks like Microsoft’s tactic of signing its titles with other cloud gaming providers like Ubitus and Nvidia may placate the regulator, despite not being a big concession in real-life market terms.”

Well, that was… 50% correct? Those deals weren’t a big concession in real-life terms. But the CMA didn’t think that Microsoft’s remedies were… remedies? Which is because the CMA didn’t have now problems with the deal, it had later problems:

“Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).

The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.”

So this is The Terminator going back in time to save Sarah Connor, having seen the dystopian future of Microsoft’s cloud gaming monopoly, and growling “Come with me if you want to live”? With the CMA playing the heroic role of Arnie, of course….

We… guess. We’re not sure about the timeline of when/if cloud gaming will intertwine meaningfully with the high-end game console market. Sure, we can see platforms without hardware like Netflix anticipating it’ll become a reality. And we dislike big tech companies swallowing the world. But this justification just feels… unsatisfying?

Reaction? Activision is super pissed, with a spokesperson telling the BBC: “The report's conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that - despite all its rhetoric - the UK is clearly closed for business.” Ouch-a-rama.

Away from the Meservey vortex, others are more sanguine, with Bobby Kotick’s statement saying that “this isn’t the news we wanted – but it is far from the final word on this deal”, alongside some bonus UK gov-poking, and Microsoft’s Brad Smith simply saying “we remain fully committed to this acquisition, and will appeal.”

So - that’s all we can really say. The CMA’s appeals process, from what it sounds like per Piers Harding-Rolls, may take up to 9 months, unless fast-tracked. So we will all live to read another newsletter or three about this large, important deal.

But another famous quote from The Terminator franchise is: “The future has not been written. There is no fate but what we make for ourselves.” And yep, that’s what Microsoft and Activision believe - that nobody should be intervening (with a shotgun or otherwise) in their business future. The CMA’s current retort? ‘Hasta la vista, Bobby’.

The state of the Nintendo Switch: 2023 edition?

Over at Switch Weekly, we’re happy to see that Chris Brandrick released the 2023 edition of his ‘State of Switch report’, surveying 2,500+ ‘core’ Switch players about their attachment to Nintendo’s aging but adorable console/handheld.

There’s a whole bunch of data in there. But here’s some of the stuff we’re digging the most:

• Nintendo really did make the Switch a true hybrid form-factor console: the above pie chart shows it clearly - people are genuinely split almost exactly 50-50 between playing on the TV most of the time and playing in handheld mode. What an amazing design feat from Nintendo?

• This ‘committed’ player group are edging away from Switch Online: results say for the online play, cloud saves & NES, SNES and Game Boy game subscription service: “Around 80% of respondents indicated that they were currently a member of the Nintendo Switch Online service. This is a fall from near 90% in 2022.”

• Switch Online’s Expansion Pack doesn’t scream ‘good value’: 48% are members, and re: the extra DLC & N64, GBA & Genesis emulated game add-on sub: “Nearly 75% of members believe the basic Switch Online membership does offer good value for money, the same is only true for around 40% of Expansion Pack members.”

• Joy-Con drift has been the major hardware failure for Nintendo Switch: a bit surprised by these stats: “Over 63% of respondents indicated that at some point they had seen Joy-Con drift in one or more of their controllers… only roughly 30% of those said they had sent their Joy-Con to Nintendo for repair.”

Finally, console overlap is always an interesting question. And for this particular survey, 845 respondents also had a PS4, 618 a PS5, 389 a Xbox Series X or S, 246 an Xbox One, 283 (high number, hardcore audience!) a Steam Deck, and 281 a VR headset.

While we know this type of opt-in survey isn’t going to get the same results as a randomly fielded one, we see very little good survey data on console players. So thanks again to Chris for putting this together - check out the full survey here.

The game discovery news round-up..

Excellent Xbox multi-year graphs via Derek Stickland, as per normal.

Finishing out the free newsletters for this week, let’s take an amble around the avenues of actionable accoutrements in our particular space, shall we? Voila:

• Microsoft (and Xbox) announced its financials yesterday, with overall game revenue down 4% - ‘content & services’ up 3% YoY (above), driven by Game Pass growth, but hardware down 30% “on a prior year comparable that benefited from increased console supply”. Perhaps some Series X shortages still, then?

• However, Microsoft’s CEO Satya Nadella highlighted Xbox ecosystem player growth numbers alongside the results call: “Claims a record Q3 for Xbox monthly active users & ‘monthly active devices.’ Revenue from gaming subscriptions almost $1 billion during the quarter. Lastly, lifetime unique users across 1st party software titles reached 500M.” No transparency on exact Xbox MAU figures, sadly.

• In ‘big platforms will attend some third-party showcases’ news, Nintendo has confirmed its attendance at August’s Gamescom event, after last attending in 2019, and skipping the 2022 comeback event. Gamescom sez: “Many more exhibitors will follow in the coming weeks”, so Cologne may be getting busy soon.

• Late-breaking news from Meta’s results - its Reality Labs division, which includes Quest VR consumer sales, “generated $339 million in revenue during the first quarter, down from $695 million last year.” And the AR/VR division had an almost $4 billion loss, when taking into account all that expensive personnel and R&D. Not great?

• While I’m not sure ‘user ratings on Metacritic’ is used extensively by prospective players, the reviews platform has promised to improve its moderation, after review bombing by players critical of some diversity at work in Horizon Forbidden West: Burning Shores’ plot.

• This fun UK Guardian interview with Sony’s Shu Yoshida throws these numbers out there: “2010’s God of War III, an extremely expensive game for its time, cost $44m to make. Modern PlayStation 5 games, such as God of War: Ragnarok can cost around $200m.” (Interesting to speculate on how much these top-end titles cost. However, this isn’t a direct Shu quote, so sourcing is unclear.)

• Video games didn’t escape the blast radius of crypto firm FTX’s implosion. CCG Storybook Brawl, which was bought by FTX in March 2022, just announced: “We’ve explored different options, and unfortunately there is no path forward. We’ll be shutting down the servers on May 1st.” Unfortunate.

• If you want to understand mobile monetization & discovery better, please trawl through Matej Lancaric’s deep dive into Habby’s ‘hybrid casual' game SSSnaker. I was fascinated by the ways deeper monetization was gradually introduced, and also by ads featuring AI-generated influencers. (Wha?)

• Total data nerd alert: the Install Base Forum folks are using public sales data from a small chain of Japanese game stores to forecast overall Japanese retail console game sales ahead of time: “Common habit is to use a 1000x multiplier to assess the Famitsu first week sales (i.e. 50 pts COMG! sales => 50k Famitsu first week sales).”

• We’ve talked about Steam reviews to sales multipliers for standalone games a whole bunch. But how about DLC review multipliers, given you’re never actively prompted to review DLC by the Steam platform? We think DLC reviews x 1000-2000x = units sold is a possible range. But we’ve also seen them as low as 300x.

• Having noticed that Japanese mobile title Uma Musume Pretty Derby reportedly hit $2 billion in lifetime spending recently, we checked out an English-language YouTube video to find out more about it, and… we guess “it's a waifu collector where the waifus are basically horses”? Cultural differences abound…

Finally, with all the continued controversy around game devs going uncredited, we stumbled across this 1983 U.S. TV commercial for an Atari 2600 game which - amazingly - calls out its creator: “Steve Cartwright does it again for Activision”:

There’s obviously context there - Activision’s original founding was from “former Atari game developers upset at their treatment by Atari”, seeking credit & royalties denied to them before. But still… we love it, and hope crediting standards improve in the now.

[We’re GameDiscoverCo, an agency based around one simple issue: how do players find, buy and enjoy your PC or console game? We run the newsletter you’re reading, and provide consulting services for publishers, funds, and other smart game industry folks.]