The UK competition authority has blocked Microsoft’s $68.7 billion acquisition of Activision Blizzard, the maker of world-famous games including Call of Duty and World of Warcraft.
The Competition and Markets Authority (CMA) said it is concerned that the deal would mess with the future of the burgeoning cloud gaming market, resulting in less innovation and fewer choices for UK gamers.
According to the CMA, Microsoft, which already accounts for an estimated 60% to 70% of the global cloud gaming market, would further increase its advantage by making some of the world’s most popular games available exclusively on its own platforms.
The regulator also noted that without the merger, Activision would begin offering games through cloud platforms, in turn allowing gamers to choose how they play without having to buy expensive gaming consoles such as Microsoft’s Xbox.
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“Microsoft already has a powerful position and advantage over other competitors in cloud gaming and this deal would reinforce that advantage, allowing it to undercut new and innovative competitors.” said Martin Coleman, chair of the independent panel of experts that investigated the deal.
“Cloud gaming needs a free, competitive market to drive innovation and choice. That can best be achieved by allowing the current competitive dynamics in cloud gaming to take its course,” he added.
In response, Microsoft Vice Chairman and President Brad Smith said the company remains “fully committed” to the acquisition and plans to appeal.
— Brad Smith (@BradSmi) April 26, 2023
In an email to Activision employees, CEO Bobby Kotick commented that this is “far from the last word on this deal”, emphasizing that it would boost the wider UK tech force and players around the world. Company characterized CMAs concludes as “a disservice to British citizens, who face a deteriorating economic outlook”, adding that “the UK is clearly closed for business”.
The CMA is only the first of three regulators that must approve the deal for it to go through, but its decision could also affect subsequent bodies in the EU and the US. If the deal fails, Microsoft will have to pay a $3 billion break fee.