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Gaming the system

Khusrau Islam discusses monopolisation in the video games industry

Big Tech has gripped the video games industry, and they’re squeezing it for all it has. Unfortunately, that means the once multi-faceted industry is slowly morphing into a playground of various conglomerates.

Larger companies have capitalised on the recent boom in the video games market, which allows them to integrate more users into their services. Microsoft acquired Activision, hoping to capitalise upon Activision’s mobile user base as the company seeks to become the one-stop shop for all your digital needs. Sony recently bought Bungie, Inc., Haven Studios, and Insomniac Games, Inc.. Their stated aim is trying to expand into multiplatform live-service, online games. Basically, they want to be your one-stop shop for home entertainment. TakeTwo Interactive, makers of Grand Theft Auto, recently acquired Zynga, the creator of FarmVille. That combines one of the biggest PC/console gaming companies with one of the largest mobile gaming franchises. Something, something, one-stop shop. You get the idea. 

Larger companies are acquiring their potential competitors and disruptors. And the market is expecting this consolidation. The Financial Times reported that after the Microsoft-Activision announcement, many developers’ prices bounced from the “prospect of a round of other deals”. And when Tencent, one of the world’s biggest gaming companies, increased their stake in Ubisoft, the latter’s share price decreased due to fears that it could not be acquired fully. 

I would say that this consolidation is the development of monopolies: a few companies are gaining control over the whole industry. Of course, just because a company controls the market does not guarantee that they will act without scruples. After all, I cannot, for the life of me, think of a single time Microsoft have ever had any issue with antitrust allegations. And Sony would never abuse their market share to control prices

The purchase of other companies by Sony and Microsoft have very real-world implications for the consumer. When Sony bought Insomniac, they were able to make a Spider-Man franchise exclusive to Sony consoles. Microsoft, if their acquisition of Activision goes through, have the ability to make popular games like Call of Duty exclusive to their consoles. 

I can probably get over not being able to swing around as Peter Parker without a PlayStation. But as these large companies consolidate larger portions of the market, it becomes harder for smaller, independent companies to grow and develop. If the market is already full of large companies, a new company will struggle to enter it and compete as they would lack the resources. This lack of competition stifles creativity and innovation, and with fewer potentially disruptive competitors, large companies have less incentive to be as good. Now, Sony have pinkie-promised that Bungie would stay somewhat free from Sony overlordship. But the truth is that companies like Sony possess ultimate control over their subsidiaries.

EA are a case study for what the gaming industry could look like across the board if only large conglomerates are left. EA earned its notorious reputation by buying up smaller gaming studios, forcing changes on their products to fit in with their own business plans, and when those products then failed, shutting down the studios. They also have pretty much exclusive licensing rights to most mainstream sports. Since they are basically the only option, they can get away with publishing pretty much the same game every year. And because they, for a time, held exclusive rights to Star Wars games, they only had to “provide players with a sense of pride and and accomplishment”, rather than an actually good game. 

Admittedly, I have focussed on the worst-case scenarios: stifled innovation and creativity, higher prices for the consumer, and lower quality products, if conglomerates sweep the industry. But even though the market is expecting consolidation, it is unlikely that this reality will come to pass: the UK Competition and Markets Authority are probing Microsoft’s acquisition of Activision out of antitrust concerns; over in the US, three antitrust campaigners and activists hold senior positions overseeing economic regulation in Biden’s government. With such champions of antitrust, the reach of the conglomerate may be checked. Nevertheless, we cannot ignore the very real threat to the gaming industry posed by Big Tech. 

Image credit: Mateo

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