Discover more from The Shortcut
Microsoft’s Activision Blizzard buyout has been blocked by UK regulator, the CMA
The CMA determined the deal would harm competition in the burgeoning cloud gaming market
The UK’s Competition and Markets Authority has blocked Microsoft’s proposed buyout of Activision Blizzard, bringing the future of the deal into question.
Following a months-long review of the buyout and its effects on market competition, the CMA determined it would harm “the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come”.
➡️ The Shortcut Skinny: Microsoft-Activision deal
⛔ The UK’s markets regulator has blocked the Microsoft-Activision deal
☁ It concluded the merger would harm cloud gaming competition
⚙ Microsoft already enjoys a lead in the sector and tech advantages
👎 The company’s proposed remedies were deemed insufficient
The CMA said Microsoft already has a “strong position in cloud gaming services” and accounts for an estimated 60-70% of the game streaming market. Its extensive reach across the tech sector, through its control of Windows and existing significant cloud computing infrastructure, combined with an impressive portfolio of Xbox games and fans, could give it a significant advantage over its competitors in the burgeoning field.
“The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft”, the CMA said. “The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.
“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.”
Although Microsoft submitted a proposal to the CMA to remedy its concerns, the regulator found significant shortcomings within them. It determined Microsoft’s promises, such as agreeing to bring Call of Duty to Nintendo platforms for the next 10 years and porting its newly acquired games to GeForce Now (a rival to its own Xbox Cloud Gaming service) didn’t properly account for the fast-changing and dynamic nature of the field.
It would also introduce cumbersome regulatory responsibilities for the CMA while preventing the merger, it said, would “effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention”.
In weighing up the benefits of the deal, it said the availability of Activision’s games on Xbox Game Pass would not “outweigh the overall harm to competition (and, ultimately, UK gamers) arising from this merger, particularly given the incentive for Microsoft to increase the cost of a Game Pass subscription post-merger to reflect the addition of Activision’s valuable games”.
Speaking about the decision, Martin Coleman, chair of the independent panel of experts conducting the investigation, said: “Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market.
“Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors.
“Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
In response to the ruling, Activision’s chief communications officer Lulu Cheng tweeted: “The CMA’s report today is a major setback for the UK’s ambitions to be a tech hub, and we will work with Microsoft to reverse it on appeal.
“This report is also a disservice to UK citizens, who face increasingly dire economic prospects, and we will need to reassess our growth strategy in the UK.”
A handful of countries have already approved the deal, including most recently Japan, although the US’s FTC sued to block the deal last year and will go to court in August, while the EU is yet to announce the verdict of its investigation.
The Shortcut is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.