May 24, 2022
Image: Microsoft; Protocol
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Tuesday, we talked with antitrust experts about what it might take for Microsoft’s proposed Activision Blizzard merger to pass FTC review. Also on the agenda: the results of a unionization vote at Raven Software.
Microsoft’s planned acquisition of Activision Blizzard is the largest-ever deal in the video game market by a mile. The eye-popping price, combined with the scale and scope of Microsoft’s ambitions for its gaming business, has invited a rare level of scrutiny and attention for an industry that’s largely flown under the regulatory radar.
The FTC is now in charge of reviewing the deal. With a newly empowered chair in antitrust expert and Big Tech critic Lina Khan and a Democratic majority, one big question stands out: Could the U.S. government block the deal, and on what grounds?
The chances of the FTC blocking the merger are low. Antitrust experts who I spoke with believe the deal is more than likely to succeed, but not without some strings attached.
The compromises could change the Xbox business. Microsoft has already pledged to abide by a set of app store principles it released in February, in a good faith effort designed to appease regulators. But the FTC review could ask for a wide range of remedies, starting with platform exclusivity.
The labor question looms large. Although not strictly an antitrust concern, Activision Blizzard’s ongoing labor crisis could become entangled with the FTC review, and it’s not clear right now to what extent Khan and her Democratic majority will take workers’ rights issues into account.
Although experts think the deal will make it through, these questions and many more could define the future shape and power of the Xbox platform. For now, Microsoft is preparing for a lengthy back-and-forth that could last well into next year, with a deal-closing target deadline of June 2023.
“It’s moving fast, at least fast enough for an acquisition of this size,” Microsoft President Brad Smith said of the deal’s timeline in an interview last week with Belgian business publication L’Echo. “One of our attorneys summed it up nicely by saying, ‘We’re coming to the end of the beginning, and now we’re entering the beginning of the middle,’” Smith said, adding that the company will “respect the process.”
“I think it’s going to be a detailed review, it will take a fair amount of time,” Sharma said. “Microsoft has learned from its past and has become much better at dealing with regulators and competition authorities both in Europe and the U.S.”
— Nick Statt
A version of this story appeared on Protocol.com.
“The announcement got an overwhelming and positive response. We see a great potential, not only in sequels, but also remakes, remasters, spinoffs as well as transmedia projects across the Group.” — Embracer Group, the Swedish holding company that acquired Square Enix’s portfolio of Western games franchises and studios, said in its fiscal year report that it has high hopes for the future of Tomb Raider, Deus Ex and others.“It is very silly that the game industry has not normalized more openness about our projects. We’ve trained the audience on the 6-12 month hype cycle and it means we’re all stuck in extreme secret for years at a time. I dig that actors often don’t get the memo.” — Indie developer Mike Bithell bemoaned the game industry’s penchant for secrecy following news that actor Norman Reedus may have accidentally spilled news about a Death Stranding sequel in a recent interview.
The digital revolution is already here – transforming the way we live, work, and communicate. Smart infrastructure is a key part of this revolution. It brings the power of the digital world to physical components like energy, public transportation, and public safety by using sensors, cameras, and connected devices.
AT&T and Google drop another cloud game. AT&T’s latest game streaming experiment for mobile customers is a cloud version of Remedy’s Control, made available through Google’s Stadia-like enterprise platform. You can play it now.
Take-Two and Zynga deal closes. The Grand Theft Auto publisher has completed its acquisition of mobile juggernaut Zynga, giving the company a sizable portfolio of mobile, casual and free-to-play games.
Activision Blizzard broke the law with anti-union activity. The National Labor Relations Board said the game publisher illegally threatened its employees and imposed a social media policy that violated their rights. The agency will issue a complaint unless the company settles.
Sony could sell PlayStation classics à la carte. As part of its revamped subscription platform, the PlayStation maker has started listing classic games it intends to bundle as individual store items, but so far only in Malaysia. The new service launches in the coming weeks.
Electronic Arts eyes an exit. The game publisher just split with FIFA and last week laid off about 100 employees at its Austin office. Now, according to news site Puck, the company has been engaging in talks with potential buyers, most recently with Comcast CEO Brian Roberts.
SiriusXM has acquired Team Coco. Sirius spent $150 million on the podcast company named after its founder Conan O’Brien, who will produce podcasts for Sirius for the next five years.
Meta has built AI to make avatars more lifelike. The company’s new MyoSuite platform can be used to create realistic musculoskeletal models, which could be key to teaching avatars more realistic and detailed body movements.SideQuest claims 2.2 million monthly users. The most popular alternative app store for Meta’s Quest VR headset just turned 3.
It’s been more than four months since quality assurance testers at Activision-owned Raven Software said they had formed a union following a five-week walkout to protest layoffs. On Monday, a group of more than 20 employees cast ballots in a NLRB-sanctioned election to determine whether Raven management would be forced to recognize the group. The union won, 19-3, making the Game Workers Alliance the first of its kind at a major American game studio.
Since January, Activision Blizzard has waged a lengthy anti-union campaign at Raven. Management split up the team and distributed members across various divisions at Raven, a tactic GWA members felt was designed to stifle organizing efforts. Activision Blizzard said in April it would convert thousands of contract workers to full time and hand out pay raises, but it excluded Raven’s union members from the bump.
Later that same month, the company tried to include all of Raven’s roughly 350 employees on the union vote; the NLRB struck the measure down, as well as future appeals trying to stall the vote. “Activision did everything it could, including breaking the law, to try to prevent the Raven QA workers from forming their union. It didn’t work, and we are thrilled to welcome them as CWA members,” said Sara Steffens, secretary-treasurer of the Communications Workers of America, in a statement.
"Now that we’ve won our election, it is our duty to protect these foundational values on which our union stands,” the GWA said. “Our biggest hope is that our union serves as inspiration for the growing movement of workers organizing at video game studios to create better games and build workplaces that reflect our values and empower all of us.”
The potential of the IIJA to shape our future is immense; if we don’t spend the funds wisely, the effects will be felt for generations. Physical infrastructure alone does not fully address the diverse needs of our modern, information-driven economy and set us up for future success.
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