It feels like we’ve been discussing Microsoft’s acquisition of Activision-Blizzard forever at this point. Microsoft entered into a $68.7 billion deal to buy Activision, one of the most popular video games publishers in the world, in January 2022. The CMA launched an in-depth review of the deal in September 2022, and in February 2023 provisionally found that the merger could make Microsoft even stronger in cloud gaming, stifling competition in this growing market.
We don’t feel the need to post an article every single time the most minute detail occurs, but this morning the first major news we’ve had on the deal came to light. The United Kingdom’s Competition & Markets Authority issued their ruling on the acquisition. In a major setback for Microsoft and Xbox, the CMA has blocked the deal primarily due to “cloud gaming market concerns.” Here are the specifics they pointed to:
According to the CMA, Microsoft’s proposal contained a number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services:
- It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
- It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
- It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.
Martin Coleman, chair of the independent panel of experts conducting this investigation, said:
- “Gaming is the UK’s largest entertainment sector. Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market.”
- “Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors.”
- “Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.”
- “Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
Our Take
With the recent news that Microsoft is aiming to close the deal in the US while preparing for any legal challenges from the FTC, this is a rather large setback for the company. As always, we prefer not to speculate nor offer personal opinions without any realistic insight.
Instead, we’ll discuss the details and next steps on this week’s Bitcast with our resident legal expect on mergers and acquisitions, Rick Hoeg. Stay tuned!
