Microsoft’s proposed acquisition of Activision Blizzard was blocked by the UK’s Competition and Markets Authority (CMA) on the grounds of concerns about the impact on innovation and choice in the cloud gaming business. The $68.7bn (£55bn) deal would give Microsoft ownership of popular titles such as Call of Duty and Candy Crush. While Microsoft and Activision have expressed their intent to appeal the decision, the UK’s rejection could potentially scupper the whole takeover, which must also be approved by regulatory bodies in the US and Europe. This article will explore the factors that led to the CMA’s decision, as well as the future of gaming and cloud technology.
Why the UK Blocked the Deal
The CMA’s investigation focused on the potential impact of the acquisition on competition in both console and cloud gaming. While the regulator was not concerned about the impact on the console gaming market, it was worried about Microsoft’s dominant position and head start in cloud gaming. Martin Coleman, who chaired the independent panel that examined the proposal, said the CMA’s decision aimed to protect competition in the “emerging and exciting market” of cloud gaming. Coleman added that Microsoft’s submitted plans to address the CMA’s concerns were not effective and would have replaced competition with ineffective regulation. He said a free and competitive market was needed to drive innovation and choice in cloud gaming, which could best be achieved by allowing current competitive dynamics to continue.
Microsoft’s Future in Gaming
Aside from the financial investment, Microsoft’s interest in Activision Blizzard lies in its desire to strengthen its position in the future gaming market. The current model for games consoles is to buy one and then purchase games to play on it. However, cloud computing and other technologies are creating the opportunity for a Netflix-like model for games, where players stream titles rather than owning them. Microsoft has invested heavily in cloud gaming, with its Gamepass service offering a subscription that grants access to a wide selection of titles. The company hopes to eventually enable players to access all these games on various devices, including phones, consoles, and TVs. Microsoft is not just investing in the current console market; it is making a play for the future of video games.
The Road Ahead
While Microsoft has signed agreements with key players in cloud gaming, such as Nvidia, its proposed concessions have not convinced the CMA that the acquisition would not negatively impact the future of cloud gaming. The remedies offered have failed to persuade the regulator, unlike their arguments around console gaming, which were accepted by the CMA. The UK games industry was surprised by the decision, given that it was widely expected to be approved. Sony, Microsoft’s key rival in the gaming market, has opposed the acquisition from the start, and its executives will be pleased with the CMA’s ruling.
The decision by the UK’s Competition and Markets Authority to block Microsoft’s acquisition of Activision Blizzard highlights the regulator’s concerns about the impact on innovation and choice in the cloud gaming market. While Microsoft and Activision are appealing the decision, the outcome could jeopardize the whole takeover, which must be approved by regulatory bodies in the US and Europe. Microsoft’s interest in the acquisition lies in its desire to strengthen its position in the future gaming market, particularly in cloud gaming. The decision by the CMA reflects the importance of a free and competitive market to drive innovation and choice in cloud gaming.
