Blessing the Couple
Competition authorities in Korea and other major countries have approved the merger of Microsoft and game maker Activision Blizzard, accelerating the 90 trillion won (US$68 billion) merger of the gaming giant that has dragged on for one year and four months. If the merger is finalized, it is expected to have a ripple effect on the Korean game industry trying to expand its console platforms and its global market.
The Korea Fair Trade Commission (KFTC) announced on May 30 that it has unconditionally approved Microsoft’s acquisition of Blizzard. There were concerns that the combination of the two companies would weaken competition in the Korean game industry, but the KFTC determined that the merger was not likely to substantially dampen competition in the Korean game market.
The KFTC based its decision on the fact that the combined market share of games developed and distributed by Microsoft and Blizzard in Korea is between 2 and 6 percent, which means that their game market share is not very high. Moreover, console and cloud game companies such as Sony PlayStation and Nvidia also have a small share of the Korean game market. Cloud gaming refers to enjoying games via streaming services rather than downloading them.
In January last year, Microsoft announced that it will acquire Blizzard for US$68.7 billion. Microsoft sells globally popular gaming console Xbox, and Blizzard is the developer of games like “Call of Duty.”
The merger news attracted much attention as one of the most expensive deals in the history of the global information technology industry, but the pace of mergers has slowed as competition authorities in major markets such as the United States and the United Kingdom blocked the deal. This month, however, the pace of mergers has picked up again, with key countries including Korea, the European Union (EU), and China giving the green light to the deal. The EU Commission required the companies to license popular games to competitors for 10 years, and Japanese regulators said yes to the deal despite concerns raised by Sony, a powerful Japanese competitor.
However, it will take more time for the merger to be completed, as the United States and the United Kingdom, two of the largest markets for the gaming industry, have rejected the deal. In order to complete the merger, their marriage must pass the review of 16 countries in which both Microsoft and Blizzard are doing business.
The difference between judgments by competition authorities in the Anglo-American and Asian markets is due to the varied popularity of the Xbox and Blizzard gaming platforms in those markets. Blizzard games account for less than 5 percent of the Korean game market, compared to 20 percent in the United States and the United Kingdom. Xbox consoles also account for only 5 to 10 percent of the game markets in Korea and Japan, but about 45 percent in the U.S. and U.K. game markets. In Asia, Microsoft and Blizzard have smaller market shares than in the United States, so there are fewer monopoly concerns about the merger in Asia.
Although the KFTC approved the merger on the grounds that its impact on the Korean market will be minimal, Korean game companies that are expanding globally and to multiple platforms such as consoles are closely watching the combination of the two companies. “If Xbox owns Blizzard’s intellectual property, Korean game companies that want to put their IP on the Xbox console platform will face greater challenges than in the past,” said an official at a Korean game company.