Microsoft a threat to gaming space

Consumers need to put pressure on the tech giant – and the government – to end monopolistic practices in the gaming market.
Microsoft is a driving force in the gaming industry, and stands to completely monopolize the market if not checked.
Microsoft is a driving force in the gaming industry, and stands to completely monopolize the market if not checked.
Photo by Micah Weber

“Minecraft”, “Call of Duty”, “Halo”, “Forza”, “Fallout”:  anyone who has ever played a video game before (and even if those who have not) have probably heard about at least one of these hugely successful titles, and although they might be in wildly different genres, they share one common trait – they are all owned by tech giant Microsoft.

Microsoft first decided to enter the gaming space in the early 1990s with games like “Minesweeper” and “Solitaire”, not exactly groundbreaking, but important since these games came pre-installed on Microsoft devices. It was not until 2002, however, that Microsoft debuted the original Xbox, earning enough to convince higher-ups at Microsoft to continue funding development, eventually leading to the 2005 smash release of the Xbox 360, which cemented Microsoft as a player in the gaming space. 

In 2014, Microsoft had its first big gaming acquisition in the form of Mojang, the development studio that owned and operated Minecraft, in a $2.5 billion buyout. Several years later, in 2021, Microsoft acquired ZeniMax Media, owner of famed publisher and development studio Bethesda, for $7.5 billion. These acquisitions gave Microsoft control of even more massive titles. Most recently, the trend has continued with the highly contested and controversial acquisition of Activision Blizzard for $69 billion, giving Microsoft control of the “Call of Duty” title, among others. 

But why has Microsoft been putting so much money into buying up game publishers and studios? 

The answer might be found in Xbox’s Game Pass (a monthly subscription that gives Xbox and PC gamers access to a library of titles while subscribed) and the company’s efforts to control the emerging cloud gaming market. However, this interest has caused some concern from competitors like PlayStation owner Sony, materializing in pressure on governments to block the deal with varying degrees of success. Unlike their other gaming-related buyouts, the Activision-Blizzard buyout has been a deal that several government establishments from multiple countries attempted to block for anti-trust reasons.

In late April of this year, the English Competition and Markets Authority blocked the acquisition in the UK, stating that “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.” 

Basically, the authority voiced its concern that Microsoft’s potential monopolization of cloud gaming would cripple competition.

Cloud gaming services have existed since around 2000, when the now-defunct G-Cluster presented a demo of the concept at a gaming event called E3. But what is cloud gaming? 

The idea is simple: rather than downloading games or owning hard copies, a player can purchase a game, or more often a subscription to a service, and stream the game from a remote server directly to a user’s device. 

Xbox or Playstation?


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Historically, cloud gaming services have been criticized for their reliance on the subscription tactic, game ownership issues, and general connectivity concerns. But within the past two to three years, cloud gaming has drastically improved in stream quality and consistency, predominantly due to interest from console producers like Sony and Microsoft during the later stages of the “console wars”, a term used to describe the competition for market share between the Xbox and PlayStation.

Currently, PlayStation controls about 80% of the traditional physical console market, leaving Xbox with a comparably small share, Microsoft is about two hundred times larger in overall net worth. And although PlayStation might beat out Xbox in overall console sales, a console is no good without games, especially with the attempted shifts towards cloud gaming, making Microsoft’s increasing ownership of big game publishers and development studios as well as enormous budgets for new acquisitions, a massive threat to all other competitors.

But outside of the business implications of this merger, one lesser discussed effect of the Activision-Blizzard acquisition is the impact on the consumer. 

Right now, Microsoft might lower prices on its game pass, and potentially even some of its product offerings. But that period of low pricing will not stay forever. As in all markets, domination within the gaming market or any of its subcategories (i.e. game development, game publishing, game distribution, etc.) will only lead to less innovation, and inevitably higher pricing. Already, the pricing of “Call of Duty: Modern Warfare II” is $10 higher than the industry standard ($60 for AAA titles), so is it really that far off to believe that if one company controls the majority of means of productions, they will not raise that industry standard pricing to meet their corporate goals? No, not at all.

So then, at what point, if ever, will anti-trust organizations like the SEC step in and either break up this monopoly on gaming, or block future mergers and acquisitions to prevent total control of the market?

Realistically, the SEC will only intervene once the market is already in a state of domination by Microsoft. Until then, consumers can only hold out hope that Microsoft’s plethora of developers and publishers will continue to make quality games, at a price point that is realistic for the everyday gamer. 

If Microsoft fails to do so, consumers and competitors alike should put pressure on both Microsoft and the government to put an end to the monopolistic practices. And if that attempt fails, consumers should look to broaden their horizons and bring their business to companies like Sony and Nintendo to try and exert what little pressure they can in hopes that the collective will be enough to force Microsoft to make some changes.

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  • Mr. AielloOct 26, 2023 at 6:36 pm

    Wow, really insightful reporting here. I was an X Box guy myself in my video game console days, before I selflessly decided to devote all my time to the betterment of America’s Youth.

    This seems like a very pressing issue, hopefully we can get it figured out before its too late.