Yesterday morning, Microsoft announced plans to acquire Activision Blizzard, publisher of games ranging from the Call of Duty series to Candy Crush Saga, for $68.7 billion. Microsoft says the move would make it the third-largest gaming company by revenue, following Tencent and Sony. The company, already a giant in the market, would gain even more leverage over how games are made and distributed. That’s assuming regulators approve it — something that’s not guaranteed amid a new push for scrutiny of potential tech monopolies.

…

A video game industry merger might not seem as immediately dangerous as something like a sprawling Amazon retail monopoly or a locked-up mobile app store. But Microsoft’s growing power in games could reduce its incentive to work fairly with third-party developers who rely on products like the Xbox and Game Pass to reach players. It could also increase the dominance of Game Pass and its leverage to raise prices on subscribers.

“It’s all about the Game Pass subscription model,” explains Matt Stoller of the American Economic Liberties Project. “Everyone who doesn’t own massive distribution is going to have an increasingly difficult time producing games and getting them distributed.”

Stoller believes there’s a precedent for blocking Microsoft’s merger as anti-competitive. He cites United States v. Paramount Pictures, a landmark 1948 Supreme Court decision that took aim at Hollywood studios’ control over the distribution of movies and the theaters where they were shown. The resulting consent decree barred studios from also owning theaters and imposed other restrictions like an end to “block booking,” which forced theaters to book slates of films in advance. (The decree was officially terminated in 2020 after a judge determined it was “unlikely” the studios would wield the same monopoly power today.) The Paramount decision “created an open market for creative content,” says Stoller — it’s credited with helping fuel the rise of television and freeing actors from restrictive contracts by reducing studios’ power.

Stoller sees Paramount-like consolidation today in games. “What you’re finding here is that it was an open market for gaming content, but it’s increasingly being closed off into walled gardens,” he says — although he acknowledges that companies like Nintendo have long maintained closed ecosystems. The recent rise of game streaming, a system where companies can exercise even more control over how content is distributed and played, could further consolidate the industry.

“Game streaming giants will make it much harder for independent game producers to get into the market,” warns Stoller. And Microsoft is one of the biggest players in that space thanks to its cross-platform Xbox Cloud Gaming (formerly xCloud) service.