Microsoft has invested huge amounts of capital and time into making cloud gaming a core part of its gaming offering.
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When Microsoft announced its offer to buy Activision Blizzard for $68.7 billion, it marked one of the biggest acquisitions in video game history — and the largest-ever deal for the Redmond, Washington-based technology giant.
There were lots of reasons for the U.S. tech giant to buy Activision. Activision owns a multitude of popular game franchises — Call of Duty, World of Warcraft, and Candy Crush Saga.
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Microsoft would gain a host of content to add to its Xbox gaming division. And it would add a slew of talent to its in-house game studios that could help with developing new games.
But the key one, and the thing Microsoft is betting its gaming future on, was cloud gaming — and that’s what ultimately threw a spanner in the works for the company’s multibillion-dollar bid to swallow Activision when U.K. regulators chose to block the deal Wednesday.
What is cloud gaming?
Cloud gaming is a technology that lets people play games from any device with an internet connection – a console, PC, smart TV, or a mobile phone — from a far-flung data center.
Traditionally, you’d need some dedicated hardware to play a game, like an expensive console or PC.
Things have gotten better over time with advances in smartphones, and there are now even major studio-quality games that can be played on phones, like Call of Duty Mobile.
But what cloud gaming offers — that makes it a differentiator — is a service on which you can stream a selection of titles in real time from a company’s remote data centers, just like you would a movie or TV show on Netflix.
Microsoft has invested huge amounts of capital and time into making cloud gaming a core part of its gaming offering. The company added cloud gaming as a free perk within its Xbox Game Pass subscription product, which offers people access to a multitude of titles for a monthly fee.
Cloud gaming could benefit consumers in developing markets where consoles and PCs are too expensive to own.
Microsoft has lost ground to console rivals — particularly Sony — over the years. In the last generation of consoles, Sony won the infamous “console wars” with its PlayStation 4 machine, which topped Microsoft’s Xbox One in terms of lifetime sales.
With the current generation of consoles, which were launched in November 2020, it has been more of the same. The PS5 has sold 32 million units to date, according to its latest quarterly numbers.
Microsoft doesn’t publish unit sales in its results, however an estimate from the video game data website VGC places lifetime sales of its Xbox Series X and S consoles just north of 20 million units.
Microsoft CEO Satya Nadella outlined the vision the company has for cloud gaming and its incorporation of Activision Blizzard in an interview with CNBC’s Tanvir Gill in November.
“We want people to be able to enjoy the games they love on platforms they are playing in. And that’s our goal,” Nadella said.
“We love the console, the Xbox, we love the PC, we love mobile. We love xCloud, which is the streaming service, so that you can even play on your television and what have you.”
“Activision is a fantastic partner of ours today that we want to be able to sort of take all the content and make sure it’s available on every platform,” he added.
Why the CMA is concerned
In its merger review published Wednesday, the CMA said that it was concerned Microsoft’s dominance of cloud gaming could hurt competition in that particular market.
“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” the CMA said in a press release Wednesday.
Microsoft takes up 60-70% of the overall cloud gaming market, according to the regulator.
The CMA — in addition to other regulators and rivals like Sony — fear that Microsoft could in future withhold its blockbuster Call of Duty, Warcraft and Diablo titles from other cloud gaming platforms.
Call of Duty is Activision Blizzard’s crown jewel, selling huge numbers every year. Its Warzone battle royale multiplayer mode alone was played by more than 6 million people in the first 24 hours of its release.
That makes it an extremely attractive asset for a company like Microsoft. Think of it like Nintendo announcing it was going to buy Electronic Arts, and it had a subscription service you could pay $10 a month for to play every new FIFA soccer game the day it came out.
In addition to Xbox, Microsoft also owns Azure, the cloud computing platform, which is used by thousands of companies for their data storage and computing power needs.
“While Microsoft has formed partnerships with third party cloud gaming providers to bring select ABK titles to their services, this does not necessarily mean these companies will be receiving unrestricted access to those games by default,” analyst firm Omdia said in emailed comments to CNBC.
“There will still be licensing terms, fees and conditions that operators have to pay – fees which Microsoft will have absorbed in a different way as part of the acquisition itself.”
“Microsoft also owns the Azure infrastructure that powers Xbox Cloud Gaming and other third party cloud services, who will be paying for every minute and every user provided by the Azure backend,” Omdia added.
“This should ensure that ten years down the line – when cloud gaming has a much larger addressable market – Microsoft will face lower operating costs than competing services.”
Cloud gaming isn’t perfect
Ultimately though, cloud gaming is still in its infancy. The technology requires a strong internet connection to function well, otherwise gamers face drops in performance and latency issues.
Shooters and fighting games are particularly demanding in terms of responsiveness.
Google notably killed its cloud gaming service, Google Stadia, in September only three years after launching it following struggles to find the right product-market fit for the platform.
Cloud gaming also isn’t a huge market. Cloud-enabled gaming services generated $5.1 billion of revenue in 2022, according to data from Omdia, less than 15% of the $35 billion made by console game sales.
But the CMA’s worry is that Microsoft could throttle the industry going forward as it becomes a more mass market technology. Cloud gaming revenues tripled in 2022 year-on-year, according to the CMA.
“What the CMA is doing is taking a forward-looking view on the matter, taking into account concerns of where cloud gaming lands in the future, relative to its small size today,” Omdia said.
“Our projection is that cloud gaming is growing rapidly, with revenue more than doubling by 2026.”
Paxton sued Google in 2022 for allegedly unlawfully tracking and collecting the private data of users.
The attorney general said the settlement, which covers allegations in two separate lawsuits against the search engine and app giant, dwarfed all past settlements by other states with Google for similar data privacy violations.
Google’s settlement comes nearly 10 months after Paxton obtained a $1.4 billion settlement for Texas from Meta, the parent company of Facebook and Instagram, to resolve claims of unauthorized use of biometric data by users of those popular social media platforms.
“In Texas, Big Tech is not above the law,” Paxton said in a statement on Friday.
“For years, Google secretly tracked people’s movements, private searches, and even their voiceprints and facial geometry through their products and services. I fought back and won,” said Paxton.
“This $1.375 billion settlement is a major win for Texans’ privacy and tells companies that they will pay for abusing our trust.”
Google spokesman Jose Castaneda said the company did not admit any wrongdoing or liability in the settlement, which involves allegations related to the Chrome browser’s incognito setting, disclosures related to location history on the Google Maps app, and biometric claims related to Google Photo.
Castaneda said Google does not have to make any changes to products in connection with the settlement and that all of the policy changes that the company made in connection with the allegations were previously announced or implemented.
“This settles a raft of old claims, many of which have already been resolved elsewhere, concerning product policies we have long since changed,” Castaneda said.
“We are pleased to put them behind us, and we will continue to build robust privacy controls into our services.”
Virtual care company Omada Health filed for an IPO on Friday, the latest digital health company that’s signaled its intent to hit the public markets despite a turbulent economy.
Founded in 2012, Omada offers virtual care programs to support patients with chronic conditions like prediabetes, diabetes and hypertension. The company describes its approach as a “between-visit care model” that is complementary to the broader health-care ecosystem, according to its prospectus.
Revenue increased 57% in the first quarter to $55 million, up from $35.1 million during the same period last year, the filing said. The San Francisco-based company generated $169.8 million in revenue during 2024, up 38% from $122.8 million the previous year.
Omada’s net loss narrowed to $9.4 million during its first quarter from $19 million during the same period last year. It reported a net loss of $47.1 million in 2024, compared to a $67.5 million net loss during 2023.
The IPO market has been largely dormant across the tech sector for the past three years, and within digital health, it’s been almost completely dead. After President Donald Trump announced a sweeping tariff policy that plunged U.S. markets into turmoil last month, taking a company public is an even riskier endeavor. Online lender Klarna delayed its long-anticipated IPO, as did ticket marketplace StubHub.
But Omada Health isn’t the first digital health company to file for its public market debut this year. Virtual physical therapy startup Hinge Health filed its prospectus in March, and provided an update with its first-quarter earnings on Monday, a signal to investors that it’s looking to forge ahead.
Omada contracts with employers, and the company said it works with more than 2,000 customers and supports 679,000 members as of March 31. More than 156 million Americans suffer from at least one chronic condition, so there is a significant market opportunity, according to the company’s filing.
In 2022, Omada announced a $192 million funding round that pushed its valuation above $1 billion. U.S. Venture Partners, Andreessen Horowitz and Fidelity’s FMR LLC are the largest outside shareholders in the company, each owning between 9% and 10% of the stock.
“To our prospective shareholders, thank you for learning more about Omada. I invite you join our journey,” Omada co-founder and CEO Sean Duffy said in the filing. “In front of us is a unique chance to build a promising and successful business while truly changing lives.”
Liz Reid, vice president, search, Google speaks during an event in New Delhi on December 19, 2022.
Sajjad Hussain | AFP | Getty Images
Testimony in Google‘s antitrust search remedies trial that wrapped hearings Friday shows how the company is calculating possible changes proposed by the Department of Justice.
Google head of search Liz Reid testified in court Tuesday that the company would need to divert between 1,000 and 2,000 employees, roughly 20% of Google’s search organization, to carry out some of the proposed remedies, a source with knowledge of the proceedings confirmed.
The testimony comes during the final days of the remedies trial, which will determine what penalties should be taken against Google after a judge last year ruled the company has held an illegal monopoly in its core market of internet search.
The DOJ, which filed the original antitrust suit and proposed remedies, asked the judge to force Google to share its data used for generating search results, such as click data. It also asked for the company to remove the use of “compelled syndication,” which refers to the practice of making certain deals with companies to ensure its search engine remains the default choice in browsers and smartphones.
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The DOJ also proposed the company divest its Chrome browser but that was not included in Reid’s initial calculation, the source confirmed.
Reid on Tuesday said Google’s proprietary “Knowledge Graph” database, which it uses to surface search results, contains more than 500 billion facts, according to the source, and that Google has invested more than $20 billion in engineering costs and content acquisition over more than a decade.
“People ask Google questions they wouldn’t ask anyone else,” she said, according to the source.
Reid echoed Google’s argument that sharing its data would create privacy risks, the source confirmed.
Closing arguments for the search remedies trial will take place May 29th and 30th, followed by the judge’s decision expected in August.
The company faces a separate remedies trial for its advertising tech business, which is scheduled to begin Sept. 22.