Microsoft and Activision Blizzard mega-deal blocked by UK competition regulator CMA

The CMA has today published a press release to confirm that it is blocking the proposed deal between Microsoft and Activision Blizzard, citing cloud gaming concerns.

Concerns over cloud gaming

In provisional findings, the CMA noted that the deal raised cloud gaming concerns and could harm UK gamers by weakening competition between Xbox and Microsoft. Big Activision Blizzard multiplatform game titles, like Call of Duty, were an important part of that competition.

The CMA seems to have doubled down on the cloud gaming aspect of the deal and raised this as the primary concern. Anticipating the rise in the cloud gaming market — where improvements in internet broadband speeds and connected technology means that gamers can stream games on their smartphones or televisions (much like streaming films through Netflix), rather than having to own expensive consoles or PC gaming rigs — and the likely provision by Activision Blizzard of its games via cloud gaming in the future, the CMA stated:

"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% of global cloud gaming services and has other important 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."

Insufficient proposals

The proposals that Microsoft submitted in support of the acquisition — which set out requirements for Microsoft offering certain titles, like Call of Duty, to other platforms over a ten-year period — were not considered sufficient to cover different cloud gaming service business models. They were also behavioural in nature, requiring continual regulatory oversight by the CMA — whereas blocking the merger would allow market forces to operate freely and dictate the direction of cloud gaming without such regulation.

UK “closed for business”

Microsoft and Activision Blizzard have understandably rallied against the decision and indicated their intent to appeal. Interestingly, they took a shot at the UK’s ambition to be a leader in the technology sector — an Activision Blizzard spokesperson went so far as to say that “the UK is clearly closed for business” — and questioned the CMA’s understanding of the market and the way that the cloud gaming technology actually works. If they appeal, a final decision is likely to be given by the end of the year. Meanwhile, Sony — an opponent of the deal with a view to protecting its own PlayStation platform — will be pleased.

From an international perspective, the UK’s CMA is leading the way, with the EU regulator’s deadline being extended to 22 May and the USA FTC’s evidentiary hearing still scheduled for 2 August. Undoubtedly, all eyes will now turn to the EU regulator to see which way it will go.