In January 2022, Microsoft announced plans to acquire Activision for $68.7 billion
The UK Competition and Markets Authority (CMA) has blocked Microsoft’s attempt to acquire Activision Blizzard, claiming the deal would lead to “reduced innovation and less choice” in the cloud gaming market.
Announced in January 2022, the deal to purchase Activision — the gaming giant behind blockbuster titles like Call of Duty, Candy Crush and Overwatch — is the largest in gaming history, with nearly $70 billion on the table. At the time, it was believed that the acquisition would substantially further the cloud company’s position in the competitive gaming industry, as well as strengthen its role in the emerging metaverse market.
The CMA launched an in-depth review of the deal in September 2022, and in February of this year, provisionally found that the deal could make Microsoft “even stronger in cloud gaming, stifling competition in this growing market.”
“Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service,” claimed the CMA, adding that the company already accounts for an estimated 60-70% of global cloud gaming services.
The CMA is not wrong about the scope of Microsoft’s gaming ambitions: In recent years, the tech company has turned its gaming business into a beast that rakes in $10 billion a year. The company makes Xbox consoles, has its own cloud gaming service and has owned ZeniMax Media, the parent company of video game publisher Bethesda Softworks since 2020, as well as Mojang, the company that develop the popular crafting game Minecraft since 2014.
“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,” warned the CMA. The agency also found Microsoft’s proposed solution to address competition concerns to have “significant shortcomings,” such as not sufficiently covering different cloud gaming service business models and not sufficiently being open to providers who might wish to offer versions of games on PC operating systems other than Windows.
Microsoft, of course, intends to appeal the ruling and the company’s Vice Chairman and President Brad Smith accused the regulators of having a “flawed understanding” of the cloud gaming market and the decision to block the deal is “bad for Britain.”
Similarly, Activision Blizzard CEO Bobby Kotick insists the merger would be good for market competition and will help the UK become a leader not just in cloud gaming, but also artificial intelligence and machine learning.
