While we’ve seen Microsoft’s reaction to the CMA (Competition and Markets Authority) statements regarding the pending Microsoft-Activision acquisition, Sony has been vocal on how they don’t feel that the deal should push through.

• Related Reading: Phil Spencer Wants to Keep Call of Duty on PlayStation With No Strings Attached, Thinks Having Contract With “Forever” in It Is “Silly”

Today, Sony’s response to the CMA has surfaced, ad this lists the numerous reasons why Sony thinks the acquisition should not go through, and lists that this deal is a “game-changer” that poses a threat the industry. Read on for the complete list Sony sent the CMA.

Executive Summary

2. The IS closely follows the CMA’s Phase 1 decision (the “Decision”), which explained why and how the Transaction would harm competition in gaming consoles, multi-game subscription services, and cloud gaming. The Decision is based on compelling and extensive evidence, including Microsoft’s, SIE’s, and Activision’s internal documents;
independent surveys; engagement, spend, and share data; multiple third-party views; Microsoft’s own public statements; and a thorough analysis of Microsoft’s past conduct.

3. SIE agrees with the Decision’s findings. It believes strongly that the Transaction will
harm competition, industry participants, innovation, and consumers. In summary:

• The Transaction is a game-changer that poses a threat to an industry enjoyed by hundreds of millions of consumers. Activision’s content – in particular its blockbuster franchise Call of Duty, one of the most successful franchises of all time that for 20 years has consistently been “the largest annualized AAA premium franchise in the games market” 1 – is irreplaceable for gaming platforms. As the Decision found, it is “especially important for attracting gamers to the platform” and its importance “cannot be captured by market shares alone” (Decision, para. 151). The Transaction would put this content under Microsoft’s sole control, giving it an unprecedented content advantage, at a point when the industry is at a critical “inflection point” in its evolution (Decision, para. 59).

• Post-Transaction, Microsoft would have the ability and incentive to exclude or restrict rivals, including PlayStation and PlayStation Plus, from having access to Call of Duty. The Decision identifies five recent Microsoft acquisitions of games studios where, shortly after the acquisition in question, Microsoft changed the business model of the acquired studios and withdrew new titles from competing platforms. As the CMA found, Microsoft “has a pattern” of acquiring development studios “and making their upcoming games exclusive to Xbox” (Decision, para. 192). Given the significance of Activision’s titles, Microsoft would have an “even stronger incentive” to make them exclusive to Xbox and Game Pass post-Transaction (Decision, para. 194). In fact, Microsoft does not contest that it intends making Activision content exclusive to Game Pass and denying PlayStation Plus access to that content (Decision, para. 226).

• The Transaction’s effect in consoles and multi-game subscription services
would cause significant harm to consumers, competition, and developers.

o Consumers would be harmed. In the short-term, PlayStation users would
no longer have access to Call of Duty or would be forced to spend £450 on an equivalent Xbox to play this hugely popular game on their less preferred device. In the mid-term, a significant number of PlayStation users would likely switch to Xbox and/or Game Pass. Faced with weaker competition, Microsoft would be able to: increase console and game prices for Xbox users (including those that had switched from PlayStation); increase the price of Game Pass; and reduce innovation and quality. These harms would be amplified by the direct and indirect network effects at play in the industry, allowing Microsoft to further raise prices or reduce quality once its position has become even more entrenched.

o Competition would be harmed. PlayStation’s and Xbox’s incentives to invest in innovation and quality improvements depend on the number of customers that competition can attract. Microsoft’s foreclosure strategy would lock in many consumers to Xbox, including existing Xbox users who play Call of Duty and those switching from PlayStation to play Call of Duty. These locked-in users would become less likely to switch in response to any procompetitive actions on SIE’s part. This would effectively prevent SIE from competing for the business of a large portion of console gamers, reducing its incentives to invest. In this way, as the Decision found, Microsoft’s strategy would “materially affect Sony’s ability to compete” (Decision, para. 204).

o Independent developers would be harmed. Independent developers today
have two principal options: PlayStation/PlayStation Plus and Xbox/Game Pass. By making Call of Duty exclusive to Xbox/Game Pass, the Transaction would tip demand for multi-game subscription services towards Xbox/Game Pass. As Microsoft foreclosed PlayStation/PlayStation Plus, it would likely become a critical distribution channel for independent developers. In that weakened negotiating position, independent developers would likely receive worse terms for their content from Microsoft or even be required to promise exclusivity in return for distribution, thereby diminishing independent developers’ ability and incentive to invest in high-quality new games. This, in turn, would also harm consumers even further.

• The Transaction would harm nascent competition in cloud gaming. The
Decision cogently explains how the Transaction would allow Microsoft to use Activision’s irreplaceable content to leverage Microsoft’s “ecosystem advantages” and thereby foreclose cloud gaming at a critical point of its evolution. Microsoft views “content, community and cloud” 2 – areas where Microsoft have unique advantages via its leadingcloud platform (Azure); its highly-successful gaming system (Xbox) and leading multi-game subscription service (Game Pass); and its dominant PC OS (Windows) – as the future of gaming. As the Decision explains,

Well, there you go. Both sides make valid points, though I don’t expect this statement to change anything when it comes to blind fanboyism of console wars.

Source: Gov.uk