Brazil says Call of Duty is not essential to remain competitive against Microsoft

Brazil has approved without reservations Microsoft’s proposed acquisition of Activision Blizzard, making it the second country after Saudi Arabia to clear the computing giant’s purchase of the troubled publisher of top flight franchises like Call of Duty.

It’s a win for Microsoft, even as it seeks regulatory approval from other bodies such as the UK’s Competition and Markets Authority and the USA’s Federal Trade Commission in key markets. Brazil’s Administrative Council for Economic Defense (CADE) released a lengthy report of its findings and analysis leading up to its decision. It’s a bit of a slog (and we’re not native Portuguese readers, so we’re working off machine translation), but CADE makes some interesting conclusions in its report, touching on things like a contentious possible exclusivity for Call of Duty, and the greater console gaming market.

Notably, CADE seems to be unconvinced by arguments that the Activision Blizzard library (and the Call of Duty franchise in particular), are such major forces in the games sector that the possibility of Microsoft making them exclusive to the Xbox games ecosystem would make the games industry inherently uncompetitive as a whole.

CADE’s report points out that games console manufacturers such as Nintendo have gone without Call of Duty at all on the Nintendo Switch, while still successfully outselling the Sony Playstation on strength of its own first party offerings, among other reasons.

“246. It is also necessary to consider that, since Call of Duty is an “essential” game, as defended by Sony, then the Nintendo Switch would probably not be able to compete effectively in the market, since no title of the franchise was released for the platform ( until the moment). What can be observed, however, is that the Nintendo console has been showing a good sales performance since its launch in 2017, having even surpassed the numbers of the recently launched PlayStation 5 and Xbox Series X|S in 2021, according to estimates.”

Call of Duty Brazil
Call of Duty might be one of the biggest franchises in the world but Brazil’s CADE argues its not essential to competing with Microsoft.

Valve’s Steam is also brought up as another wildly successful digital storefront that has, for significant chunks of time, gone without the latest Call of Duty and Activision Blizzard releases, without being massively disadvantaged.

“271. The absence of Call of Duty in recent years, however, did not prevent Steam from occupying a leading position in the ranking of digital stores, especially among Brazilian consumers.”

CADE concludes that even if Microsoft controls significant console and game distribution platforms, it’s not in its interest to disadvantage other publishers competing with Activision Blizzard, nor would Activision Blizzard games be “essential assets” required to successfully compete against Microsoft in the console and digital game distribution markets.

Forbes’ Paul Tassi makes the interesting observation that “Brazil doesn’t even care if Microsoft is being disingenuous about letting Call of Duty stay on PlayStation indefinitely, as the point is even if they change their mind, it’s not a move that would be fundamentally anti-competitive for the market.”

While Microsoft’s acquisition of one of the biggest games publishers in the industry could very well hurt Sony, the CADE notes that its mission is to protect Brazilian consumers and market competitiveness, not specific competitors, and as far as they’re concerned, the Activision Blizzard deal, if it goes through, won’t massively disadvantage Brazilians or the market.

It’s an interesting position for Brazil’s competition watchdog to take, and while there are other arguments to be made and reasons to be wary of increasing industry consolidation, Sony’s line of argument that Microsoft’s potential acquisition of Activision Blizzard would make it impossible to compete doesn’t seem to hold water in the eyes of the state.

Of course, sealing the deal is still a long way away. Other regulators such as the American FTC and the UK’s CME are still scrutinizing the bid, so there’s still plenty of possible hurdles that could stand in the way of finalizing what could be the biggest gaming industry acquisition yet.