Microsoft Activision acquisition blocked via Game Pass
The UK’s Competition and Markets Authority (CMA) announced its decision to block Microrosfts $69 billion acquisition of Activision Blizzard on Wednesday, citing concerns it would hurt competition in the growing cloud gaming market, where Microsoft dominates thanks to Game Pass. It’s a shocking turn of events for what appeared to be a mega-merger that was otherwise headed for regulatory approval.
“We have concluded that the merger would result in the most powerful operator in the rapidly evolving cloud gaming market, with a current market share of 60-70%, acquiring a portfolio of world-leading games with the incentive to these games from competitors and significantly weakens competition in this important growth market,” according to the CMA wrote in his final report. Both Microsoft and Activision Blizzard have announced that they will do so contest the decision.
A seemingly likely outcome of Microsoft’s purchase of Activision Blizzard would be that the latter’s hit games like surveillance 2, DiabloIVAnd Call of Duty: Modern Warfare 2 would all be added to Game Pass. The CMA argues that this would give Microsoft, already a leader in cloud gaming, even more anti-competitive control. It also suggests that the company would then have an incentive to increase the prices of cloud gaming subscription services like Game Pass, while potentially withholding certain releases from some competing platforms like Sony’s PlayStation Plus.
Continue reading: Everything that happened in the Microsoft Activision merger saga
Microsoft has tried to allay those concerns in recent months, signing slew of deals with smaller cloud computing providers in the UK and promising to make Activision Blizzard’s games available through them alongside its own xCloud service. However, the CMA seemed unfazed by these overtures, calling Microsoft’s proposed remedies too limited, which would imply they would leave out competing services like Sony’s and that enforcing the agreements would require too much ongoing regulatory oversight.
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“We have already signed deals to bring Activision Blizzard’s popular games to 150 million more devices, and we remain committed to reinforcing those deals through regulatory action,” said Brad Smith, vice chair and president at Microsoft , in a statement. “We are particularly disappointed that after much deliberation, this decision appears to reflect a flawed understanding of this market and how the underlying cloud technology actually works.”
Activision’s reaction to the news was harsher. “The CMA report goes against Britain’s ambitions to become an attractive country for building tech companies,” a spokesman wrote in a statement. “We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to British citizens as they face an increasingly poor economic outlook. We will reassess our UK growth plans. Global innovators big and small will find that for all its rhetoric, the UK is clearly closed to business.”
This language echoed previous claims by Activision CEO Bobby Kotick that the UK was “Death Valley‘ when it torpedoes the deal that promises huge financial gains for itself and other company executives. The merger is still under investigation by authorities in the European Union, who are expected to announce a decision in May, and the Federal Trade Commission is currently threatening an antitrust lawsuit against the acquisition. It’s unclear how the CMA’s initial surprise decision might impact US and EU approvals as a result, as failure in either region could likely derail them.
