November 30, 2020

On Those Microsoft Acquisition Rumours…

 


… calm down. Breathe. Relax.

The rumours swirling around of Microsoft wanting to buy EA and Valve (amongst other studios) is nothing especially new. We’ve heard for years how Microsoft threw money around like it was going out of style during the 360/Gen-7 era, and we’ve seen that a combination of arrogance and executive incompetence managed to ostensibly ruin pretty much every decent exclusive franchise that Microsoft had. We’ve also heard for years that Microsoft has been sniffing around looking for some low-hanging fruit, and EA has been a name that comes up on a regular-ish basis. It’s nothing new.

Now, let’s break this down into manageable pieces.

First of all – any acquisition of EA (or any other big third-party publishing unit) would be hotly contested by the wider industry – you think the likes of Activision or UbiSoft are going to sit back and watch Microsoft run roughshod over shareholders – well, in UbiSoft’s case Vivendi has been doing that for a while but therein lies the point. Most third-party publishers are quite happy as they are right now. A big acquisition that would unquestionably remove or threaten to remove exclusive content from other platforms – even if that is not the intention from the outset – will also throw up red flags for Sony and Nintendo, who right now are the bigger fish in the pond. I doubt the games industry, at large, is going to sit back and let something like this happen without kicking up at least a little bit of a stink.

Then you get to the meat and two veg of the situation – this kind of attempt to “buy up” market dominance would run afoul of competition regulations.

Sega and Nintendo attempted to price fix with stores during the 90’s and because Nintendo survived longer than Sega – I know – it was Nintendo who pretty much ended up with a staggering EU Anti-Competition fine – $147 million, at the time one of the biggest fines ever. And this was just colluding to fix a few prices. I can’t imagine that the EU, UK or even US competition regulations would sit back and go – yeah, let’s let Microsoft just buy up the video game console market that is in a pretty buoyant state right now. Hell, Microsoft couldn’t even escape this with pushing its own browser in Windows – does anyone really genuinely believe Microsoft would be allowed to attempt dominion over console gaming, which by the way is a huge tax market?

Microsoft would be punished squarely in the nadgers for it. Even if they absolutely promised 100% to not actually stop third-party game creation – like Mojang – most are of the belief (including me since I wrote about it!) that Microsoft is absolutely acquiring data though this. At some point though a one-off acquisition can start to look like an aggressive push to buy out the market. I’m still kind of shocked Microsoft wasn’t fined by the EU for buying exclusivity during Gen-7!

And right now, any attempt to gun for the console market at this point would be fruitless. Hell, gamers don’t even like EA but I guarantee you an aggressive acquisition of EA would probably generate a substantial (and weird) amount of empathy for the company. And you really, really don’t want to be pushing that. To be seen as more evil than EA at this point would be such a PR disaster that it would rend the fabric of reality.

eathing
I mean, do you really want to keep this branding right now?

But of course… to lay this squarely at the feet of the console market is to slightly miss the point. The latest rumours very clearly state “EA and Valve” – and that, to me at least, suggests this has nothing to do with the console space and everything to do with PC Gaming.

EA’s Origin (eww) and Valve’s Steam platforms (and GOG.com) are huge PC Gaming platforms. With the recent acquisition of Humble.com by Ziff Davis Media (they behind IGN, because they’ve absolutely never tried pulling this stunt before with Direct2Drive or anything…), Microsoft is probably getting a little desperate to have more presence on the PC Gaming scene. Yes, the XBox Game Pass will probably carve out a small niche since all the games will be playable on the PC – and people genuinely try to pretend it wasn’t an answer to Sony’s PS Now! service having arrived on the PC space – but it won’t really be enough.

Valve and EA would give Microsoft pretty much the entirety of their major competition in this arena. In short, it would single-handedly give Microsoft absolute dominion over the PC Gaming market.

… and does anyone remember what I said earlier about those browsers? Yeah, the latest round of that was in 2013, when the EU – who love their fines it seems – dropped a $731 million fine on the heads of Microsoft for not promoting competitive browsers. Microsoft said this was a technical glitch with an update – but it took a while before said “glitch” was fixed. And as has been mentioned in the BBC article, the EU could have theoretically fined Microsoft 10% of its annual revenue, which would have been $7.2 billion – an eye-watering sum, though $731 million is just as mind-bending.

The EU would genuinely balk at this kind of manoeuvre, and the potential fines for not towing lines or sorting out a path for competition to flourish would be astronomical. Microsoft is set to be a trillion-dollar company by 2020, and that’s the kind of money that can buy you a lot of things but it can also get you into a lot of trouble. And I can’t see the UK or the USA being too thrilled at the idea of 95% of a given market being dominated by a single company, particularly one which again generates substantial tax revenues from multiple companies – start to condense them under one roof, and the tax revenue starts to drop. That’s math – you can have one company paying 10% of its revenue in tax at $7.2 billion, or that plus four other companies contributing another $7.2 billion collectively. What, this is about consumer rights? Oh how naive…

But deeper than that, I think it also shows how hopeless Microsoft is at this stuff.

Microsoft used to be the thing in PC Gaming. But around 2000/2001, Microsoft got a hankering for the Console Space and threw a massive amount of time, money and attention on the original XBox and the subsequent XBox 360. The disaster there was that around 2004-ish, Valve was beginning to push Steam as a thing, though it’d be a few more years before Steam became a dominant force. Which it did because Microsoft pretty much ignored PC Gaming for more than a decade, and I’d say it was only around the XBox One launch that Microsoft began to realise just how far it had fallen behind. And of course, Valve wasn’t alone – Origin existed, GOG.com, Humble and more had all sprung up alongside indie spaces like Itch.io.

steamlogo
This is not a high bar anymore.

To turn attention back to the PC market would, ostensibly, be what Microsoft’s shareholders would prefer – not least because they suddenly realised that they don’t have absolute dominion on their own OS – but it would mean, at a stroke, conceding the console market entirely. Whilst talk has been more positive about the XBox brand in Microsoft these days, it’s not been an historically good relationship between brand and shareholders. And they’d know an attempt to spend what would be tens of billions of dollars – or more – on EA and Valve would be an attempt to sew up the PC market again. At which point those voices will come in – “sure, you can have this money to get us back exclusive control of the PC Gaming space but you have to stop making expensive and wasteful games consoles!”

… there’s really no good way to go about this for Microsoft.

I mean, it’s not an unreasonable assumption that Microsoft, which is in a position right now where it needs games on the XBox One and it needs them yesterday, would spend money on acquiring companies that could pad the gap. But let’s also put a dash of wasabi-strength logic in here.

Even IF – and it’s a big, smelly IF – Microsoft acquired EA and avoided all the pitfalls and the EU and UK and US were fine with it for whatever reason and gamers didn’t worry about it and EA’s shareholders and executives were all fine with it (an astronomical feat in and of itself), and if this deal was magically hammered out in the next six months or so (which is high fantasy) the next step is to… well… get EA’s studios like BioWare (which Microsoft used to own – I know, this rabbit hole is weird) to make exclusive games. And they’re going to take years – two years minimum, and a good four years at a more realistic angle in a 4K future. Microsoft could buy it but all current arrangements would have to be… well… upheld. So games already tethered to the PlayStation 4 or Nintendo Switch would still have to release on said platforms, or penalties would apply. Hence why Minecraft is a thing on other platforms. Deals were already made and Microsoft couldn’t just renege on them (even if it wanted to – which it probably didn’t).

By the time any actual exclusive content made exclusively for the XBox One X arrived, it would either be a new console generation – which would be a crying waste of time – or, more realistically, far too late to save the XBox One X as a system. Nintendo got around this by being weird, again, but it worked. Sony gets around this by effectively having the lions share of the console market, though Nintendo will very soon give Sony’s Japanese presence a bloody nose. XBox One… it needs games now, not four years down the road. Acquiring Valve for console games doesn’t make much sense either (have you seen the state of releases on Steam of late? *shudders*), but we’ll let that slide for now.

So yeah, my rumour rank for this is – Extremely Unlikely.

I’m sure Microsoft would love to have EA and Valve. But do EA and Valve want to be bought out by Microsoft, a company both are effectively kicking the ass of on the PC Gaming side right now? And with so many legal issues to go through, then to go through years of negotiations with shareholders, buying piece by piece to get a controlling stake in the company, and then to convince other platforms and companies and countries this is a good thing?

To get even within fondling distance of EA’s software warchest, Microsoft would have to dedicate a team of genius-level lawyers on it for years. That’s not going to be cheap. And nothing can really be done until the process is completed. Microsoft may prove me wrong, but on this front… I doubt it. There’s so many hurdles and complications in the way here. It’s not like buying Mojang for a ridiculous sum, a small indie developer with a monster software hit. And that wasn’t exactly entirely without complication either.

Microsoft could buy exclusive content – which Phil Spencer said he didn’t want to do. Or Microsoft could, and I’m just going to put this out there – invest that potential $50+ billion figure in new studios making new IP or updates of classic IP, creating new jobs and aggressively chasing down the market by making decent, quality software that people might genuinely be in danger of giving a fraction of a molecule of an iota of a toss about.

It buys EA… it buys EA’s baggage. It buys Valve… it buys Valve’s baggage. It creates new studios and opens up new job positions and prospects, it’s good for the economy and good for the industry and it might actually be good for Microsoft. And yes, it’s the longer game. These games won’t magically appear overnight. But at least it keeps its hands clean of EA’s stink and the mountain of trash flooding onto Steam lately. And Microsoft’s shareholders would probably prefer not to pay such an exorbitant volume of money for what is, right now, a mountain of trash they’d need to spend additional millions or billions of dollars cleaning up just to get to the decent bits underneath.

Spending that money on their own IP that they can shape as they want and just waiting for Valve and EA to bottom out through greed, incompetence or inaction seems to be the far more sensible path. Why buy up competition that’s already shooting a minigun into what remains of its feet?

Microsoft may still end up arbiters of PC Gaming just by sitting back and letting the competition screw things up on their own.

And that won’t cost them a penny.

Kami

I'm the big cheese here. Comment, subscribe, direct waves of hate at me - all the same. Just hope you've had some partial enjoyment here!

View all posts by Kami →

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.