It was very bad year for the meta, the company formerly known as Facebook, is extremely unique for being one of the largest technology companies in the world. Even though TikTok is still making nearly $7 billion in profit in recent months, TikTok is eating its lunch, the share price is in decline, and even The Kardashians rebelled. Now Meta is also being sued by the Federal Trade Commission due to its monopoly on virtual reality technology. This is a shocking case that could have implications for other major gaming acquisitions.
Filed on the same day as the Meta latest bad earnings reportFTC is obtaining an injunction against the company’s attempt to take over Within, a VR startup with a popular workout app called Supernatural. The agency literally called it “illegal acquisition for expansion [Meta’s] virtual reality empire in your press release. Meta responded by saying in a statement that the FTC’s argument is based on ideology, not evidence, and would hurt future developments in virtual reality.
“It’s a riskier business, but they think it’s worth it because if successful, it will help push the boundaries of enforcement.” – William Kovacic, former chairman of the Federal Trade Commission, said New York Times on Wednesday. The case will be heard in the coming weeks and months in California’s Northern District Court.
Why the FTC Meta-Suit Was a Surprise
Considering that Within is unlikely to even register as a rounding error for the billions that Meta currently invests annually in VR development, it seemed like a strange deal for the FTC to go into beast mode. But for antitrust advocates, it’s the perfect target to turn back the clock after years of weak enforcement. Having allowed Meta to gobble up competitor after competitor (the most famous of which are Instagram and WhatsApp), the FTC has to start somewhere.
“Because of these and other setbacks, the FTC (and the Department of Justice) are now scrambling to catch up, spending vast amounts of time and resources on litigation to try to spin deals and stop monopoly abuses,” wrote Ron Knox, researcher antitrust agency. -monopoly institution of local self-government, in the thread yesterday. “[FTC Chair] Lina Khan, in this Within merger lawsuit, said, “Enough is enough.”
In 2020, the Meta controlled 62% of the market for VR helmets. In the first quarter of 2021, Oculus headset shipments totaled 75% of the market (and just this week it was announced that raise the price by $100). This directs users to the Oculus store for VR apps. One of them is Supernatural, a super-popular immersive fitness experience that lets you box, meditate and do yoga in virtual reality. Meta’s philosophy, like other big tech companies, has long been “if you can’t beat ’em, buy ’em” and its VR business is a prime example of that.
The Oculus Rift headset technology was originally developed by Doom lead designer John Carmack and others and funded in part through Kickstarter crowdfunding. Meta bought it in 2014 for $2 billion. One of the most popular VR games ever Bit Saber. Meta bought it in 2019. The company has since bought a bunch of other VR studios.
“If Meta is allowed to buy Within, this competitive pressure will ease,” the FTC wrote in a statement yesterday. “This reduction in competition violates antitrust laws.” The agency goes on to argue that this trend itself discourages other authors from innovating in this area.
What does this mean for gaming?
It’s hard not to notice some of the parallels with Microsoft’s current drive buy activation blizzard. The company spends its own money acquiring studios to feed endless content. oven that is a Game Pass. In a sense, this strategy goes back to buying mine craft in 2014. But the acquisitions of Obsidian, InXile, Ninja Theory and others in recent years show that buying content instead of creating your own was not an isolated case. From Bethesdahe got hits like fall out, ancient scrollsas well as Rock. Together with Activision Blizzard, it will acquire Call of Duty, Diabloas well as candy crush.
One key difference is that Microsoft doesn’t have the stranglehold on gaming hardware that Meta has on VR. The Xbox manufacturer has also gone to great lengths to try to calm the FTC that nothing he does is anticompetitive. In February, Microsoft devoted to the idea to the “Open App Store Principles” list and signaled to the FTC that it would not make games like Call of Duty as well as Overwatch platform exclusives. In June, he pledged to be neutral with regard to union activity and persuaded the Communications Workers of America declare your support for the takeover bid.
Notably, Sony’s acquisition of Bungie also went off without a hitch. This may be because the FTC is focused on conventional tech deals with companies like Apple and Google (the agency is also currently investigating Amazon). At the same time, if the takeover of Activision Blizzard goes through, it will be the largest acquisition in the history of technology. Ironically, Microsoft agreed to pay $95 per share, but Activision Blizzard shares are still only trading at $79. The deal is expected to close by June 2023 and Microsoft reportedly already shared all the information the FTC was looking for. Once Activision Blizzard does the same, the agency will have 30 days to complete the review.