Microsoft is building an Xbox mobile store to bring games directly to mobile devices, challenging Apple and Google. The software giant first hinted at a ‘next-gen’ store it would ‘build for games’ earlier this year but has now quietly revealed blueprint details in repositories with the UK Competition and Markets Authority (CMA).
The CMA is currently investigating Acquisition of Activision Blizzard for $68.7 billion and asked Microsoft for the context. In its docs, Microsoft says a big motivation for the purchase is to help build its presence in mobile games. His plans for this space apparently include creating an Xbox mobile games platform and store. Here’s what the company says in the filings:
The transaction will enhance Microsoft’s ability to create a next-generation game store that works on a range of devices, including mobile, through the addition of content from Activision Blizzard. Building on Activision Blizzard’s existing gaming communities, Xbox will seek to move the Xbox Store to mobile, attracting gamers to a new Xbox mobile platform. However, moving consumers away from the Google Play Store and the App Store on mobile devices will require a major shift in consumer behavior. Microsoft hopes that by offering well-known and popular content, gamers will be more inclined to try something new.
Call of Duty: Mobile and Candy Crush Saga are two hugely popular mobile games published by Activision and King, respectively, and Microsoft could leverage these titles to help build a game store to rival Google Play and the App Store. Given Apple’s policies blocking third-party app stores on iOS, it’s hard to imagine Microsoft competing on iPhones anytime soon. But that clearly isn’t stopping it from considering an Xbox mobile app store.
Microsoft’s acknowledgment of a mobile gaming push comes as the company increasingly positions Xbox Cloud Gaming as an option for mobile gaming on emerging handhelds. Microsoft was quick to support Xbox Cloud Gaming on Valve’s Steam Deckfollowed by a partnership with Logitech and Razer for their cloud gaming-focused handhelds. That means a push into mobile gaming could happen on multiple fronts, not just on phones and tablets.
Beyond the hardware, there’s also a lot of revenue at stake here. The games are among the most popular downloads on mobile and drive in-app purchases in app stores. Microsoft clearly wants a slice of that pie. Watch how the company describes the opportunity:
The transaction gives Microsoft a significant presence in mobile gaming. Revenue from King Division mobile games and titles such as Call of Duty: Mobile, along with ancillary revenue, accounted for more than half of Activision Blizzard’s revenue in the first half of 2022. Mobile customers account for about three-quarters of its MAU. Microsoft currently has no significant presence in mobile gaming and the transaction will bring much-needed expertise in mobile game development, marketing and advertising. Activision Blizzard will be able to bring its knowledge of mobile game development and publishing to Xbox game studios.
However, the CMA barely discussed Microsoft’s potential for entry into mobile gaming as part of its investigation and instead focuses largely on console gaming, which Microsoft says represents an increasingly small share of the game. global market. In a chart published on Microsoft’s Activision Blizzard acquisition site, the company describes the entire gaming market as worth $165 billion in 2020, with consoles accounting for $33 billion (20%), PCs at 40 billion (24%) and mobile games at $85 billion (51%). ).
Building a successful rival to the Google Play Store or App Store would be a huge challenge, however, and Microsoft will have to woo third-party developers if it hopes to make inroads.
The company appears to be laying the groundwork here by committing to a set of principles that would allow developers to freely run their own app stores on its Xbox mobile platform and offer their own payment systems to process in-app purchases. This is an advantage that Apple certainly does not offer. (These commitments don’t yet fully extend to Xbox consoles, but Microsoft said earlier this year that it was “committed to closing the gap on the remaining principles over time.”)
Microsoft says these same principles will also apply to the future Xbox mobile store, which could be enough to attract developers to the platform. One company that might be particularly interested is Epic Games, which has allied itself with Microsoft over the past few years in the fight against Apple’s App Store policies.
Tim Sweeney, CEO of Epic Games welcomed Microsoft’s first hints of an open app store model in 2019 in front of a giant battle between Epic and Apple a year later who saw Fortnite disappear from iPhones. Epic argued that Apple should allow third-party payment systems in its App Store or even allow competing app stores to run on iPhones and iPads.
Ultimately epic uses Microsoft to help argue its case in court, and Microsoft has increased the pressure on Apple with some significant Windows Store changes days before Epic vs. Apple trial last year.
Epic did not win its legal case, and Fortnite is still not back on the iPhone. But Epic turned to Microsoft to bring Fortnite on Xbox Cloud Gaming earlier this year after court documents revealed that Epic initially blocked the game of Xbox Cloud Gaming because the service was “competitive with our PC offerings”.
This closer partnership between the companies could help persuade Epic to join Microsoft’s mobile game plans early. Epic has already adopted Samsung’s Galaxy Store on Android, and having Fortnite and Call of Duty: Mobile on Microsoft’s Xbox mobile game store would be a good start in a difficult task facing Apple and Google.
However, a big potential stumbling block for Microsoft’s mobile gaming ambitions could be its control of Call of Duty on mobile and console. Microsoft has had success with Xbox Game Pass, and it’s made it clear that it wants to bring Activision games to the service. Regulators are now assessing the impact this would have on competition.
Xbox Game Pass is also at the heart of the ongoing battles between Microsoft and Sony over Call of Duty. Sony argues that Microsoft could take Call of Duty completely away from PlayStation, while Microsoft says it wouldn’t make business sense. This disagreement has overthrown in a public war of words between Sony’s PlayStation chief and Microsoft’s Xbox chief, but the real conflict is behind closed doors.
Microsoft says now keep Call of Duty on PlayStation is a “business imperative to the Xbox business and the transaction economy” and that it would put revenue at risk if it pulled Call of Duty consoles from Sony. “Microsoft has made it clear that it relies on revenue from the distribution of Activision Blizzard games on Sony PlayStation.”
But even if Call of Duty remains on PlayStation, Sony could still lose serious revenue if Microsoft offers the title on Xbox Game Pass. Microsoft has previously claimed that Sony pays for ‘blocking rights’ to keep some games off Xbox Game Pass and now says that’s the case with Call of Duty. “The agreement between Activision Blizzard and Sony includes restrictions on Activision Blizzard’s ability to place Call of Duty titles on Game Pass for several years,” Microsoft says in its docs.
The CMA and other regulators now have the unenviable task of unraveling these arguments between Sony and Microsoft and determining exactly how this deal could harm consumers or competition. Microsoft still hopes to close this deal by spring 2023, but chances are we’ll have months of battles ahead – as well as the opportunity to get rare information, like with these mobile plans, on the secret ambitions of the gaming industry.