The gaming market is founded on proprietary console platforms from three suppliers – Sony (Playstation), Nintendo (Switch) and Microsoft (Xbox). Other software vendors, such as Activision Blizzard and Electronic Arts, address these platforms only once through being licensed to do so by one of the three suppliers (see my Figure above for their revenue trends, showing the sum of their four quarter sales at the end of each quarter since Q1 2014). There is also a significant market in PC gaming, where software suppliers build their offerings to run on Windows or Linux.
The UK’s Competition and Markets Authority (CMA) has been against the take-over of Activision Blizzard by Microsoft in July despite regulators in other regions being more positive about the move.

One way of assessing the success of each vendor is to look at the revenues the software sales generated by each of their platforms. My Figure above shows leading 4 quarter values for the period between 2014 and 2023. Thereby:

• The most successful has been Nintendo, which is only a gaming supplier; the introduction of the Switch increased software sales massively, despite a lack of compatibility with its Wii. It has also maintained reasonable strong sales of software to its much cheaper mobile products such as the DS and 3DS.
• Although its PSP software sales have been the lowest, Sony’s Playstation has succeed in maintaining between $5 and $11 billion annually in software sales, despite the complications of addressing backward compatibility when introducing model 4 at the end of 2014 and model 5 in 2020. Sony of course has many non-gaming businesses – it is perhaps best described as an entertainment supplier.
• Microsoft’s Xbox has been least successful of the proprietary platforms; although annual sales have been consistent, since the pandemic they have been at only half of the revenues associated with Sony and Nintendo’s main platforms. Buying Activision Blizzard would have raised its software sales to somewhere near those of its 2 rivals. Microsoft’s other businesses are mainly in IT, where it is the leading software, and second placed cloud, supplier.

There are a variety of other component suppliers which have strong stakes in the gaming market. These include:

• AMD, which supplies the processors to the Playstation 5, the latest of which is a 5nm chip manufactured by TSMC and to the Xbox, the latest of which are the RDNA 2 CPUs and Zen 2 GPUs in the Xbox X/S.
• Nvidia, whose Tegra X1 is the processor in Nintendo’s Switch.

Others include Logitech, which generated $1.2 billion from gaming peripherals in the year to the end of March.

Each of the leading console manufacturers has its own Internet service, offering a number of offerings allowing users to download software, connect with others to play interactive games, watch TV. These are so widely used that Sony slowed the Playstation download speeds down to free the Internet up for more valuable workloads during the pandemic. Microsoft also reported that there were over 270 million new friend relationships created on Xbox Live at that time. However these Internet services are essentially different from cloud computing (see my Figure above for the growth in supplier revenues since 2014). in their use of proprietary consoles to access – or at least to make best use of – them.
The gaming market, as I see it, is strongly based on proprietary console hardware. Successful games (whether made or licensed by Nintendo, Microsoft or Sony) are almost always tied to a single platform, which are enhanced through specific Internet services. PC gaming is a separate market, where games are not tied to a single platform. The UK regulator CMA has every right to disapprove Microsoft’s acquisition of Activision Blizzard, but I fail to see why future competition in the ‘cloud gaming’ market gives it a sufficient reason. It is doing better by preventing ARM – one of Europe’s few relevant global ICT suppliers – from being acquired by American supplier Nvidia; but then again, if the UK government really believes it has a global role to play in the computer industry, it shouldn’t have approved ARM’s sale to Japanese Softbank in 2016 on the day after the Brexit vote.