Microsoft tells regulators that it wants to create an Xbox mobile app store

When it comes to the smartphone business, Microsoft could have been a contender. Windows Mobile was the operating system on many popular pre-iPhone handsets like the Motorola Q. It also ran some post-iPhone touchscreen models like the HTC Touch Diamond, the HTC Touch Pro, and the HTC HD2 to name a few.

Many consumers favored Microsoft's Windows Phone over iOS and Android due to its buttery smooth scrolling. But the Lumia handsets running the software, whether made by Nokia or Microsoft, never caught on, and as a result, developers never felt compelled to develop apps for the platform. Eventually, Microsoft put the kibosh on its plans to challenge iOS and Android and when Microsoft launched the Surface Duo dual-screened handset in 2020, it was powered by Android.

Microsoft does have ownership of a vast amount of intellectual property related to Android and it made much more money each year with the success of Google's mobile operating system than it did having ownership of Microsoft's Windows Mobile and Windows Phone.

According to The Verge, the UK’s Competition and Markets Authority (CMA) is doing its due diligence in investigating Microsoft's $68.7 billion acquisition of game maker Activision Blizzard. In responding to questions posed by the regulatory agency, Microsoft mentioned that the acquisition would allow it to take on the Google Play Store and the Apple App Store.

Microsoft's response included these comments: "Building on Activision Blizzard’s existing communities of gamers, Xbox will seek to scale the Xbox Store to mobile, attracting gamers to a new Xbox Mobile Platform. Shifting consumers away from the Google Play Store and App Store on mobile devices will, however, 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."

The report names two popular video games, Activision's Call of Duty: Mobile and King's Candy Crush Saga that Microsoft could use to help it build a mobile app storefront that could compete with the Play Store and App Store. Microsoft, noting the popularity of mobile games and the revenue it drives of in-app purchases, sees Apple and Google making a fortune and wants a piece of the action.

Discussing the proposed purchase of Activision Blizzard, Microsoft explains to the CMA that "The transaction gives Microsoft a meaningful presence in mobile gaming. Mobile gaming revenues from the King division and titles such as Call of Duty: Mobile, as well as ancillary revenue, represented more than half of Activision Blizzard's ... revenues in the first half of 2022."

Microsoft adds that it "currently has no meaningful 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 contribute its learnings from developing and publishing mobile games to Xbox gaming studios."

The software giant has put up a website for its Activision Blizzard acquisition and has posted a giant graph showing the history of the gaming industry. The graph shows a valuation for the entire gaming business of $165 billion in 2020 with consoles valued at $33 billion (20% of the market), PCs worth $40 billion (24%), and mobile gaming valued at $85 billion (51% of the market).

The CMA happens to be focused on how Microsoft's proposed acquisition would impact the console market. The smallest tier of the industry, the purchase would represent a larger chunk of this market which could make the regulatory agency concerned enough to block the deal. Microsoft would prefer that the CMA look at how a possible purchase of Activision Blizzard would be a small drop in the mobile gaming market.

Even if Microsoft gets the green light to close on the purchase of Activision Blizzard, becoming a challenger to the App Store and Play Store is going to be tough. On Android, games found on an Xbox mobile app store could be sideloaded on a mobile device. But that still won't work on iOS where Apple's walled garden prevents users from sideloading apps in the name of security.