Last week, Microsoft announced that the company was acquiring Activision Blizzard, the gaming giant responsible for such megahits as Overwatch, Diablo, Call of Duty, World of Warcraft and Candy Crush.
The nearly $70 billion acquisition of the recently troubled gaming studio speaks to the growing trend of large tech companies buying and merging with smaller ones to consolidate power in the tech industry. This lopsided concentration of power hurts consumers and smaller competitors in the industry. While many high-profile members of the Biden administration have called for greater regulation over tech to curb antitrust and anti-competitive practices, the concentration we’ve seen in the industry also poses a privacy problem.
Microsoft already owns the popular Xbox console platform and profitable gaming franchises like Halo, Forza, Age of Empires and Minecraft. The Activision Blizzard deal will likely be even more impactful, since this is actually the second major game studio Microsoft has purchased in less than a year. Just last March, Microsoft announced it was acquiring ZeniMax, the parent company of popular games studio Bethesda Softworks, in a $7 billion deal. Bethesda is the creator of gaming franchises, including Fallout, Doom and Wolfenstein.
It’s clear that Microsoft is moving to take over a large part of the gaming market. Investors certainly thought so, with console gaming competitor Sony experiencing a huge drop in stock prices right after the Microsoft announcement. By acquiring Activision Blizzard, Microsoft is expanding into new territory, including mobile gaming as well as, potentially, virtual and augmented reality. Microsoft’s announcement noted that this acquisition would “provide building blocks for the metaverse.”
Coincidentally, on the same day, Federal Trade Commission Chair Lina Khan and Assistant Attorney General Jason Kanter announced a plan to “modernize” merger guidelines — guidelines that could restrict or even block exactly the kind of deal Microsoft just announced. If and when regulators from the FTC and Department of Justice review the Activision Blizzard acquisition, they should look not only at its competitive effects on the market but also at the consumer protection and competition issues related to data privacy. Because not only is Microsoft gaining market share, intellectual property, and employees, it's also making a play to take more consumer data in the process.
It’s clear that Microsoft is moving to take over a large part of the gaming market.
By expanding gaming across console, PC, cloud, mobile and even metaverse, Microsoft is opening new avenues to attract consumers and to collect and use consumer data. Different types of data are collected from different gaming platforms. For example, mobile gaming apps can collect data related to phone usage behavior, including location tracking. If Microsoft plans to expand its metaverse-related virtual and augmented reality game offerings, this will mean significantly more collection of biometric data as well, potentially well beyond what it gathered with the discontinued Xbox Kinect console.
The Activision Blizzard deal will also mean a lot more user data for Microsoft (and it already has access to quite a lot). This is something that should concern all of us. The privacy risks related to data collection are compounded when a company is able to collect vast amounts of data from different sources, all on the same individual. It becomes easier for that data to fall into the wrong hands or lead to misuse or reidentification of private data.
Privacy and antitrust are intertwined. The larger and more powerful a tech company becomes, the more it is able to collect and use data from private individuals. Likewise, the more data a company has, the harder it is for other companies to compete. For example, if one company has access to billions of data points on user behavior and preferences, it is likely more able to meet consumer demand than a smaller company that lacks those resources. This slows innovation and creates risk of greater privacy harms to consumers.
Companies with greater market share are also often better equipped to shape the legal and regulatory conversation as well, something that has helped big-tech companies avoid privacy regulation for quite some time.
The Microsoft and Activision Blizzard deal speaks to the great potential for profit in the gaming industry. But it also raises cause for concern. Even if this deal is allowed to go through, it’s another example of tech companies snapping up smaller companies in order to concentrate market power. Biden’s antitrust-savvy appointees are unlikely to ignore this trend, which means greater regulation is probably on the horizon.
As consumers, we deserve a market that provides innovation and opportunity. As individuals, we deserve digital rights like data privacy. And as gamers, we deserve to be able to fight for the Horde without having to worry about what Microsoft plans to do with our data.