In the wake of Microsoft’s $69 billion acquisition of Activision Blizzard, completed in October 2023, the gaming industry is grappling with a series of ripple effects that have sparked widespread debate among developers, consumers, and regulators. What was heralded by some as a transformative deal promising innovation and expanded access has instead led to substantial workforce reductions and escalating costs for players, prompting former Federal Trade Commission Chair Lina Khan to reiterate her warnings about the merger’s potential harms.

Khan, who led the FTC’s unsuccessful lawsuit to block the acquisition in 2022, recently took to social media to highlight these developments. She pointed out that the deal has been followed by “significant price hikes and layoffs, harming both gamers and developers,” as reported in a detailed analysis by PC Gamer. This commentary comes amid Microsoft’s announcement of a roughly 50% increase in Xbox Game Pass Ultimate pricing, jumping from $16.99 to $19.99 per month, alongside other tier adjustments that have frustrated subscribers.

The Human Cost of Consolidation: Layoffs and Studio Closures Signal Broader Industry Strain

The layoffs have been particularly stark. Since the merger’s closure, Microsoft has cut thousands of jobs across its gaming divisions, including 1,900 positions in January 2024 primarily from Activision Blizzard and Xbox teams. More recently, additional reductions have affected Bethesda Softworks and other units, contributing to a total of over 2,500 gaming-related layoffs in the past year alone. Industry insiders note that these moves are part of a broader effort to eliminate redundancies and streamline operations post-acquisition, but they have raised alarms about creative stagnation.

For developers, the impact is profound. Studios like Tango Gameworks, known for innovative titles such as Hi-Fi Rush, were shuttered despite critical acclaim, leading to concerns that Microsoft’s focus on high-revenue franchises like Call of Duty is sidelining riskier, artistic projects. As Kotaku detailed in its coverage, these decisions reflect a corporate strategy prioritizing profitability over diversity in game development, with former employees voicing frustration over abrupt closures that disrupt ongoing projects and careers.

Price Hikes and Consumer Backlash: Game Pass’s Evolution Raises Questions About Value

On the consumer side, the Game Pass price increases have been met with backlash, as subscribers now face higher fees for a service that was once positioned as an affordable alternative to buying games outright. The Ultimate tier’s hike, coupled with restrictions on day-one access for certain titles in lower tiers, has led many to question the long-term viability of the subscription model. Microsoft justified the changes by citing rising operational costs and the need to sustain high-quality content, but critics argue it exemplifies the anticompetitive behavior the FTC feared.

Echoing these sentiments, former FTC Chair Khan emphasized in her statements that the merger would likely “substantially lessen competition” in emerging markets, a point reinforced by GamesRadar, which described Microsoft as “too big to care” in its post-merger actions. This perspective aligns with broader antitrust concerns, where dominant players can raise prices without fear of rivals undercutting them.

Regulatory Reflections and Future Implications: Lessons from a Contested Merger

Looking back, the FTC’s 2022 lawsuit argued that the acquisition could create a monopoly in console and cloud gaming, potentially leading to higher prices and reduced innovation—a prophecy that appears to be unfolding. While Microsoft prevailed in court, committing to keep Call of Duty multiplatform for a decade, the subsequent developments have validated skeptics’ fears. Publications like Video Games Chronicle have noted that these price adjustments and layoffs directly contradict pre-merger assurances from executives like Activision’s then-CEO Bobby Kotick, who claimed the deal would “benefit consumers and workers.”

For industry insiders, this saga underscores the perils of unchecked consolidation in tech and entertainment. As Microsoft integrates Activision’s assets, including powerhouse franchises, the focus shifts to whether these changes will ultimately foster growth or stifle competition. With ongoing scrutiny from regulators and mounting pressure from affected developers and gamers, the true cost of the merger may only become clearer in the years ahead, potentially influencing future deals in the sector.