The ongoing saga of Microsoft’s deal to acquire Activision Blizzard continues as the BBC is reporting that the UK Competition and Markets Authority (CMA) is blocking the deal — but not because they think it will stifle competition in the console market.
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First announced back in January of 2022, Microsoft announced plans to acquire Activision Blizzard, known for the Call of Duty, Warcraft, and Diablo franchises, for a whopping $68.7 billion. The companies were hoping the deal would be closing early this year, however regulatory and anti-competition boards in various countries have been investigating the deal.
If you’ve been following along, Sony would have you believe that with Microsoft owning Activision Blizzard, Xbox would have an unfair advantage when it comes to console games like Call of Duty. Since announcing the deal, Microsoft has announced a number of deals to bring the popular first-person shooter and other Xbox games to other consoles (like the Nintendo Switch) and cloud-gaming services like NVIDIA GeForce now for terms of 10 years should the deal go through. That hasn’t appeased Sony though, and they continue to fight the acquisition even though Sony has plenty of exclusives and deals with third-party companies that prevent games from being released on the Xbox console.
However, the CMA ruled not because it was concerned that the deal would reduce competition in the console gaming market, but rather to protect competition in the “emerging and exciting market of cloud gaming.” Xbox currently has a significant advantage in that area with its Xbox Game Pass game subscription service which allows many games to be streamed through various devices including smartphones, tablets, and even TVs without needing to download or install them.
Martin Coleman, the char of an independent panel, added that “Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors. Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
The BBC continues, stating that “the remedies offered so far by Microsoft to try to persuade the CMA that this deal would not have a negative impact on the future of cloud gaming have clearly not worked – unlike their arguments around console gaming, which were accepted by the CMA.”
Brad Smith, vice chairman and president of Microsoft, was understandably disappointed in the decision but vowed to move forward with trying to get the deal approved:
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
Brad Smith, vice chairman and president of Microsoft
Activision-Blizzard also vowed to appeal the decision:
“We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”
Activision-Blizzard spokesperson
It is an interesting turn of events as the general belief was that the UK regulatory board was leaning towards approving the deal based on Microsoft’s concessions around console gaming. Sony, no doubt, will rule this as a victory and likely double down with the EU and the FTC to make sure this deal tanks for Microsoft and Activision Blizzard.
The FTC in the United States is also looking to block the deal and this decision by the UK Competition and Markets Authority will likely only add to their resolve. The FTC decision isn’t expected until near the end of the year, however, and many things can change before then. The EU regulatory board must also approve the deal if it is to move forward.
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