Microsoft Acquisition of Activision Blocked by UK Regulator
Microsoft's record-setting proposed acquisition of gaming company Activision Blizzard for $68.7 billion has hit a setback as a U.K. regulatory body has blocked the deal due to concerns with cloud-based gaming.
On Wednesday the Competition and Markets Authority (CMA) released a statement saying it was halting the merger "over concerns the deal would alter 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 regulatory body pointed out that the strong increase of cloud gaming in the U.K. (which tripled from 2021 to 2022, according to the CMA), coupled with the perceived notion that Microsoft will make Activision Blizzard games exclusive to only Microsoft's cloud gaming service (Xbox Game Pass), will hurt competition in the market for other cloud gaming services. Per the press release:
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.
The CMA initially outlined its cloud gaming concerns back in February and, in today's announcement, said that Microsoft, while trying to address the initial concerns, had not demonstrated ways to alleviate many of the expressed issues. Some specific examples included Microsoft's lack of intent of offering Activision Blizzard games on non-Windows-based PCs and its possible standardization of pricing for cloud gaming services due to the company's dominant position in the market. "Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market."
Microsoft responded Wednesday, saying it would appeal the decision. In a tweet, Microsoft President Brad Smith said that the company has already taken steps to increase Activision Blizzard games' availability to an additional 150 million devices to alleviate competition concerns and it finds the CMA's decision "flawed." "The CMA's decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom," wrote Smith.
Microsoft's acquisition of Activision Blizzard was first announced in January 2022, with an expected close of sometime in fiscal year 2023. It is uncertain if that timeline is still possible when or if Microsoft can reverse the decision of the CMA.