UK explains why it wants to block Microsoft $69 bn Activision deal

Britain has explained why it wanted to block Microsoft’s $68.7 billion acquisition of Call of Duty maker Activision Blizzard. CMA believes that the deal would hinder competition in the cloud gaming market.
Microsoft to acquire Activision BlizzardThe country’s antitrust regulator today said that Microsoft’s commitment to offer access to Activision’s multi-billion dollar Call of Duty franchise to cloud gaming platforms would not effectively remedy its concerns.

Microsoft, which is facing setback in several markets, said in a statement it remained committed to the acquisition and would appeal the decision. Activision said it would work aggressively with Microsoft to reverse it.

The ruling comes after the Competition and Markets Authority (CMA) last month dropped its concerns about the impact of the deal on the console market led by Sony’s market-leading PlayStation.

That left cloud streaming services as the remaining hurdle, which Microsoft sought to overcome by signing licensing deals with the owners of streaming platforms including Valve, Nvidia and Boosteroid.

Microsoft had already offered Sony – a vocal opponent of the deal – a 10-year Call of Duty license, in line with an agreement to bring the multi-billion dollar franchise to Nintendo’s Switch.

Europe will decide on the deal by May 22. The United State’s Federal Trade Commission is also seeking to block it.

CMA explains

The UK cloud gaming market is growing fast. Monthly active users in the UK more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to £11 billion globally and £1 billion in the UK by 2026. By way of comparison, sales of recorded music in the UK in 2021 amounted to £1.1 billion.

US-based Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.

Microsoft already accounts for an estimated 60-70 percent of global cloud gaming services and has other strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).

The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

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.

Microsoft is a global technology company offering a range of products and services, with a turnover of nearly £125 billion the financial year 2021. Since 2001, Microsoft has sold Xbox gaming consoles. Gamers download digital copies of the games they want to play on Xbox from Microsoft’s Xbox Store. Microsoft also offers a multigame subscription service, Xbox Game Pass, where gamers pay a monthly fee to gain access to a library of games.

Activision Blizzard is a game developer and publisher with global turnover of £6.3 billion in the financial year 2021, with over £700 million of this in the UK. It develops popular gaming content for consoles, PC, and mobile, which includes titles such as Call of Duty, World of Warcraft, and Candy Crush.