The UK competition authority has blocked Microsoft’s $68.7 billion takeover of Activision Blizzard, maker of world-renowned games like Call of Duty and World of Warcraft.
The Competition and Markets Authority (CMA) said it was concerned the deal would manipulate the future of the fast-growing cloud gaming market, leading to less innovation and fewer choices for UK gamers.
According to the CMA, Microsoft, which already accounts for an estimated 60% to 70% of the global cloud gaming market, would further extend its advantage by making some of the world’s most popular games exclusively available on its own platforms.
The regulator also noted that without the merger, Activision would start offering games via cloud platforms, which in turn would allow gamers to choose how they play without having to buy expensive game consoles like Microsoft’s Xbox.
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“Microsoft already enjoys a strong position and edge over other competitors in cloud gaming, and this deal would strengthen that advantage and give it the ability to undermine new and innovative competitors,” said Martin Coleman, chair of the independent panel of experts overseeing the deal conducted investigation.
“Cloud gaming needs a free, competitive marketplace to drive innovation and choice. The best way to do that is by allowing the current competitive dynamics in cloud gaming to keep doing their job,” he added.
In response, Microsoft vice chairman and president Brad Smith said the company remains “fully committed” to the acquisition and plans to appeal.
We remain committed to our acquisition with @ATVI_AB and will be appealing today’s CMA decision. Here is our statement. pic.twitter.com/ylvDP5RUqQ
— Brad Smith (@BradSmi) April 26, 2023
In an email to Activision staff, CEO Bobby Kotick noted that this is “far from the final word on this deal”, stressing that it would empower the broader UK tech force and gamers around the world. The company characterized CMAs decision as “a disservice to British citizens who are faced with an increasingly poor economic outlook”, adding that “the UK is clearly closed to business”.
The CMA is only the first of three regulators that need to approve the deal for it to go through, but its decision could also impact subsequent respective bodies in the EU and US. If the deal fails, Microsoft will have to pay a $3 billion break fee.