No one knows why the UK blocked Microsoft’s Activision deal

The UK Competition and Markets Authority (CMA) torpedoed what may be the biggest tech acquisition in history this week and hardly anyone understands why. There are many reasons to prevent a giant company from buying huge competitive advantages just because it can flood the Zone with $69 billion in cash. But the regulators’ final decision to do so ended up with one thing that nobody particularly cared about: cloud gaming.

Cloud gaming hasn’t been high on the radar, mainly because very few people use it, and it’s still a very poor substitute for playing on a local console or PC. “Small and bad” isn’t usually where you’d expect antitrust authorities to turn their attention, but that’s the part that’s killing the deal now, and, in the eyes of some analystspossibly doomed to fail.

To be clear, I have no personal interest in the outcome of Microsoft’s $69 billion gamble. I play my Xbox Series S in the morning, my Switch at noon, my PS5 at night, and spend the rest of my waking hours on PC and mobile. There will be new games and news anyway. I’m just amazed, that’s all.

The announcement came as a shock in part, because at least to the public the month-long debate The deal seemed to be all about whether Microsoft would do something in the end call of Duty an Xbox exclusive or not. Sony said it would, or at least that Microsoft would make each PlayStation version a lot worse. Microsoft claimed it would not monopolize call of Duty, and offered a 10-year contract promising this. The CMA finally sided with Microsoft in March, provisionally completed There was no commercial incentive for the company to withhold the smash-hit shooter series from competing platforms.

Regulators fear Microsoft will crush cloud gaming competitors

A month later, the CMA decided that cloud gaming was the real threat and set out their reasoning in the second half of a more than 400-page final report. His reasoning is broad and multifaceted, but the gist of it goes something like this: cloud gaming will be huge, Microsoft already dominates it, and the market could be irrevocably sabotaged if Microsoft decides to do so call of Duty or World of Warcraft exclusively for its streaming service. “We therefore believe that the merger is likely to lead to a significant reduction in competition in the market for the provision of cloud gaming services in the United Kingdom,” the regulators wrote.

What’s so weird about this line of thinking is that it’s basically taking the very problem that the CMA said wasn’t a problem for consoles — Microsoft may be making Activision’s games exclusive to Xbox — and says it is for cloud -Games would be crippling. Microsoft would lose a lot of money if it ruptured call of Duty away from PS5 players but would suffer no real consequences if it refused to make it widely available at competing cloud gaming startups, increasing the likelihood and risk of it doing just that. At least that’s what the CMA thinks.

It’s not entirely delusional. In the recent past, regulators have given mergers the green light that ended disastrouslyso they have good reason to be more skeptical now. As Bloomberg reported Earlier this week, the Federal Trade Commission was criticized for failing to anticipate the impact of Facebook’s acquisition of Instagram. “Regulators are more likely to focus on deals that threaten competition in mature, developed markets,” she wrote. “But Wednesday’s British action reflects a growing emphasis on deals that could hamper the rivalry going forward.”

At the same time, the CMA’s analysis of cloud gaming relies heavily on forecasts and speculation, and appears to fundamentally misunderstand some key points. In one section, regulators attempt to measure the likelihood that cloud streaming platforms could use network effects to create screened gardens. When Microsoft’s xCloud is the only place to stream surveillance 2, DiabloIVAnd Call of Duty: Warzone 2.0won’t it create a cascading set of incentives that make it all but impossible for other companies to compete and launch their own streaming services?

While it’s impossible to say, that’s certainly not what’s been happening on TV and movies, where we’re drowning in subscriptions to all kinds of content. I get Premier League on Peacock, star trek on Paramount+, war of stars on disney+, successor on HBO Max and Curious George on Hulu (the kids want what the kids want). It costs a ton and actually sucks, but while Netflix has remained dominant, it’s hardly the only game in town.

Cloud gaming is not a console war

Cloud gaming is, of course, much more complex, and the CMA rightly points to Microsoft’s advantages of owning a bunch of technology and infrastructure as a major challenge for rivals like Nvidia and Sony. However, it all seems to be burned into the market at this point. Why is Microsoft allowed to own Windows and huge data centers and manufacture computers? I have no idea, but the ship sailed with it. Whether people won’t subscribe to PS Plus for streaming Spiderman because they already pay for Game Pass to stream Modern Warfare II seems to be a completely different question.

It also misses the key point that hardly anyone pays to subscribe to cloud gaming services these days. Google abandoned Stadia for precisely this reason. Sony refolded PS Now into PS Plus. Nvidia GeForce Now is cool, and it’s still extremely niche too (although the most important thing is to compete on tech rather than content). xCloud is the market leader not because people want to stream Halo infinity but because it’s free with a Game Pass subscription to play with starfield on day one on a physical Xbox where it will actually work.

In the end, the CMA seems to be treating cloud gaming like an extension of the console wars, with one platform’s market share coming at the expense of the other. It seems less concerned with the technical side of the cloud gaming market, revolving around software and server racks, and more concerned with subscriptions like Game Pass, which can reach enough critical mass to overwhelm competing services through brute force.

But the thing about content is that you can always do more with it and you never know exactly where the next hit will come from. Activision Blizzard just made it one of the games on last year’s top 10 bestseller list, and it wasn’t even number one in the UK. It is too early to say whether Microsoft and Activision’s appeal against the CMA’s decision will be successful, or happen fast enough to save the deal. At the moment it is hard to imagine that the result will have a major impact on the future of cloud gaming, at least in the US where it is offered on the internet remains hopelessly broken.

Curtis Crabtree

Curtis Crabtree is a 24ssports U.S. News Reporter based in London. His focus is on U.S. politics and the environment. He has covered climate change extensively, as well as healthcare and crime. Curtis Crabtree joined 24ssports in 2021 from the Daily Express and previously worked for Chemist and Druggist and the Jewish Chronicle. He is a graduate of Cambridge University. Languages: English. You can get in touch with me by emailing:

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