Issuing its provisional findings on the proposed deal last month, UK regulator the Competition and Markets Authority raised concerns that Microsoft could choose to increase the price of its Game Pass subscription plans following the addition of popular Activision content.
“Prices for subscriptions can easily be revised, and Microsoft may have an incentive to do so once it adds content that is as popular as Activision’s, including CoD,” it suggested.
However, in a newly published response to the CMA’s findings, Microsoft said it doesn’t plan to raise Game Pass prices due to the deal going through and claimed that doing so would be counter-productive because it would lead to a drop in subscribers.
“Game Pass prices will not increase as a result of the Merger, and certainly will not increase to a point that offsets the substantial benefits of Activision titles coming to Game Pass on a day and date basis,” it wrote. “This is especially so given Game Pass will continue to be constrained by B2P [buy to play].”
Microsoft went on to point out that it had not increased Game Pass prices since introducing popular Bethesda content to the service, following its acquisition of the publisher’s parent company ZeniMax Media, which saw it take ownership of franchises including The Elder Scrolls, Fallout, Doom and Dishonored.
“The integration of Activision and Microsoft will result in a classic elimination of double marginalization effect because Microsoft will be able to acquire these games at (opportunity) cost and will have incentives to distribute them more broadly and increase the output of Game Pass relative to its counterfactual level. In order to increase output Microsoft will need to offer Game Pass at a lower quality-adjusted price.
“This is exactly what Microsoft has done when it has added content to Game Pass in the past with, for example, the ZeniMax transaction resulting in additional content but no increase in Game Pass subscription prices. This is especially so given that Game Pass users are price sensitive and an increase in the price of Game Pass would affect all users, including those that do not value or play CoD.
“Game Pass subscribers can cancel at any time after a month of play,” Microsoft continued. “As CoD titles are only released once a year, any impact would be short-lived as gamers who exhaust their enthusiasm for the new version of CoD within a few months will churn because of the higher price.
“As such any price increase would be counter-productive as it would increase subscriber churn rates. This is entirely at odds with the Provisional Finding’s assessment of Microsoft’s rationale for the Merger.”
Sony has previously argued that if Microsoft and Activision are allowed to merge, their combination would significantly reduce PlayStation’s ability to compete with Xbox, and provide Microsoft with the opportunity to “increase console and game prices for Xbox users (including those that switched from PlayStation); increase the price of Game Pass; and reduce innovation and quality”.
Elsewhere in its response to the CMA’s provision findings, Microsoft said it believed Call of Duty: Warzone and Modern Warfare 2 could be optimised to run natively on the Nintendo Switch.
The CMA is due to rule on the deal by April 26.