UK Blocks Microsoft’s $68.7 Billion Activision Blizzard Merger over Cloud Gaming Concerns

Image: Microsoft

The Competition and Markets Authority (CMA) has announced that it will be blocking Microsoft’s proposed acquisition of Activision Blizzard in a deal valued at $68.7 billion. In a press release titled “Microsoft / Activision deal prevented to protect innovation and choice in cloud gaming,” the UK regulator expressed its worries about how the deal would stifle competition and undermine innovation in the cloud gaming market, and while Microsoft presumably did its best in trying to address those concerns, it failed for at least three major reasons. Brad Smith, Vice Chair and President of Microsoft, has tweeted a statement that can confirm Microsoft will be appealing the CMA’s decision.

Why the CMA Rejected Microsoft’s Proposal

  • It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
  • It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
  • It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

From a GOV.UK press release:

Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).

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 evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. 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.

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