The Competition and Markets Authority (CMA) in the UK has blocked Microsoft’s pending acquisition of Activision Blizzard, citing competition concerns in the cloud gaming market.
It seemed that Microsoft was on a better than likely trajectory towards approval recently, following the CMA’s determination that the proposed acquisition wouldn’t substantially harm competition in the console market. In that reasoning, they found that keeping certain franchises from competing platforms might be financially damaging to Microsoft.
“We remain fully committed to this acquisition and will appeal,” Microsoft’s Vice Chair and President Brad Smith said in a statement after the final decision was announced.
We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ
— Brad Smith (@BradSmi) April 26, 2023
Microsoft has been busy securing 10-year deals to put its games, and Activision Blizzard games post-acquisition (if approved) on rival platforms. This may have helped sway the console question, but they’ve also announced several similar deals for streaming platforms. Still, the CMA wasn’t convinced. They're publishing their initial decision, they shared more information on why cloud gaming was the reason why they have rejected the deal.
Part of this rests on Microsoft owning Windows, having big cloud infrastructure, and Xbox and a number of studios and IPs. They cite that “Microsoft accounts for an estimated 60 to 70% of global cloud gaming services”, which would, in their determination, only become more dominant with an Activision Blizzard acquisition, thus reducing competition and having an impact on the market.
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages Technology innovation and investment in the United Kingdom,” according to Smith. “We are 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,” he concludes.
Where the CMA found that making Activision Blizzard IPs exclusive on console wouldn’t give Microsoft an advantage, in terms of cloud gaming, they do. It would be “commercially beneficial to make Activision's games exclusive to its own cloud gaming service, making it harder for other platforms to compete”.
With competition reduced or out of the way, it could even mean increased prices for GamePass. Ultimately, the CMA hanging this on cloud gaming rests on threats to competition in the developing cloud gaming market.
