UK regulator prevents Microsoft’s acquistion of Activision Blizzard

Following the warning of the Competition and Markets Authority (CMA) that Microsoft’s deal to buy Activision Blizzard would weaken the global competition in the gaming market, the UK regulator has now blocked the $68.7 billion acquisition.

In today’s press release, CMA announced that it has decided to prevent the deal between Microsoft and Activision Blizzard in order to “protect innovation and choice in cloud gaming”. The UK regulator is reportedly concerned about the damage that the acquisition could do to the cloud gaming market.

CMA block Microsoft’s further expansion into cloud gaming

According to the findings of CMA’s investigation into the deal, Microsoft’s position in the space is already too strong, accounting for up to 70% of global cloud gaming services. This is in addition to owning Xbox, as well as Windows — the world’s leading operating system for computers — which means the company becoming a monopoly on multiple markets.

CMA says that the merger would give Microsoft even more control of the market, which would further strengthen its market advantage. Indeed, franchises such as Call of Duty, World of Warcraft, Overwatch, and Diablo, among other AAA titles, have a strong and long-standing position in the space, as well as strong profits. By blocking the deal, the regulator seeks to avoid these games become exclusive to Microsoft-owned platforms.

Furthermore, the evidence shows that if the deal never came up, Activision Blizzard would soon start to provide its titles on cloud platforms.

CMA’s press release stated:

“Microsoft’s solution had significant shortcomings and would require regulatory oversight by CMA.”

“Cloud gaming needs a free, competitive market to drive innovation and choice.”

In reaction to the decision, Blizzard CEO Bobby Kotick has reportedly sent an email to employees, saying that both companies will try to plead to CMA for a revoke of the decision. Meanwhile, Microsoft president Brad Smith shared on Twitter that the company “remains committed”.

Cloud gaming

The CMA also considered whether the merger would have any benefits to the gamers, specifically whether the benefit of having Activision’s titles and content available on Microsoft’s Game Pass would be bigger than the harm that this could cause.

According to the release, the benefits of this merger would not outweigh the overall harm to the market, which would likely also include the increase of Game Pass price after the deal is done due to adding Activison’s games.

CMA stated:

“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.”

Besides the CMA, the acquisition of Activision Blizzard by Microsoft has been under regulatory review by the European Commission, as well as the U.S. Federal Trade Commission. While the US regulatory body already filed a lawsuit to block the deal back in December 2022, the European Commission hasn’t yet provided its stance.

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