At the end of December 2022, the National Economic Prosecutor’s Office (FNE) gave the green light to the purchase of Activision Blizzard Inc (ABK) (creator, among many other games, of the popular Call of Duty) by Microsoft Corporation (Microsoft) and He ruled out that it would “substantially reduce competition” in the video game market. Microsoft had submitted the acquisition notification to the Prosecutor’s Office in July of that same year.
The FNE’s position is in contrast to that of the Federal Trade Commission (FTC), since the latter estimates that the US$69 billion deal would give way “to Microsoft to suppress the competitors of its consoles of Xbox games and its rapidly growing business of content by subscription and games in the cloud, ”explained the agency, which seeks to block the purchase.
Nevertheless, The FNE, after conducting a market study, determined that the background information allows it to rule out an impact on competition in the video game marketTherefore, “it is recommended to approve this concentration operation in a pure and simple way, as it is not suitable to substantially reduce competition”, according to the merger approval report.
For the study, the regulatory body requested information from both Microsoft and ABK, competitors and other players linked to the video game industry. In addition, it conducted a survey of Chilean video game players to gather information on preferences and consumption patterns.
The FNE report describes that Microsoft is a technology company that operates worldwide that develops activities in different segments, including the video game business. Thus, it publishes and distributes video games for computers, consoles and mobile devices. Video game publishing extends to both self-developed games and those made by independent developers. In addition, Microsoft offers the subscription service to video game catalogs of its own development and those of third parties, and the functionality of gaming in the cloud or cloud gaming.
Additionally, Microsoft produces the Xbox console, which includes different generations of said device that have been released to date, and is also engaged in activities related to digital display advertising. It also develops and sells Windows operating system and software.
For its part, ABK is a company based in California, United States, which among its activities includes the development and publication of video games for computers, consoles and mobile devices. ABK does not market nor is it linked to any company that produces gaming consoles or devices, says the FNE report.
In addition, both companies offer digital advertising space and licenses for commercial promotion or merchandising.
In its analysis, the FNE detected that video game development companies segment the different geographical areas by region, recognizing Latin America –in some cases excluding Mexico and Brazil– as a region with its own particularities in terms of player profile and preferences. .
For example, in Latin America, without considering Brazil, the two genders that generate the highest profits are shooter (of shooting) and sports (of sports)while in regions such as Asia and Oceania, the genres that top the list are shooter and action-adventure (action and adventure).
For its part, in Asia a large part of the income generated by video game sales comes from the RPG genre (role-playing game, or role-playing games), unlike what happens in other regions, in which games of this genre represent a smaller share of revenue.
Within the competence of ABK and Microsoft are the console providers: Sony -responsible for Playstation- Y Nintendowith video games developed by their own studios.
Thus, one of the relevant points regarding competition that the Prosecutor’s Office collected is that among the most popular video games of sony franchises appear: The Last of Us, God of War, Ghost of Tsusima, Marvel’s Spider-Man, and MLB The Showall exclusive to their platforms.
In the case of Nintendothe most popular video games developed by this company correspond to Animal Crossing, Super Mario Bros. and The Legend of Zeldawhich are also exclusive video games for their platforms.
On the other hand, with respect to consoles, particularly for Chile, the investigation carried out by the FNE shows that the most commercialized is Nintendo Switch and that in 2021, Xbox was the second most relevant in terms of sales (and the third globally).
Now, with respect to the difference between the different regions in the world, the report also indicates that the preferences of Latin American players vary with respect to the world average. In that sense, although Electronic Arts (developer of games like The Sims and FIFA) It remains the most important developer, its relevance increases in Latin America, representing between 20% and 30% of total revenue from digital sales compared to 10%-20% globally.
Also, according to the report, Epic Games (Fortnite and Gears of War developer) is positioned in second place in the ranking and ABK remains in third place, although its participation decreases compared to the world average. As a whole, the seven main developers concentrated between 70% and 80% of the total digital sales of games for consoles for Latin America.
The regulatory body was also able to determine that ABK’s main franchise, call of duty, including its various titles, is among the top video games currently available. However, at the Latin American level, its relevance is comparatively less.
On the other hand, regarding revenue, the FNE report highlights that in 2020 globally, Call of Duty was present among the ten video games with the highest revenue generated on consoles with two of its titles: “Call of Duty: Modern Warfare” and “Call of Duty: Cold War Black Ops”. Nevertheless, the sum of the income generated by these two titles does not exceed the main title on the market: Fortnite.
The same is true when looking at the Microsoft and Sony platforms separately. In that sense, Fortnite the most successful franchise for Xbox, and FIFA for Playstation. The former also represents a higher proportion of total revenue and player preferences in Latin America compared to other regions worldwide.
Nevertheless, the FNE concluded that, given the foregoing and among other backgrounds, the entity that would result from the merger would become one of the main video game developers globallybut what In Latin America there are other players with a significant presence in the market that could act as a counterweight.