Microsoft surprised the entire world in 2022 when it announced it would be acquiring Activision Blizzard for about $68.7 billion. This would give the Xbox division a huge amount of strong IPs like World of Warcraft, Crash, and the top-selling Call of Duty series. Of course, this raised concerns in the industry about a possible monopoly, and Sony especially fought against the acquisition. The UK’s CMA (Competition and Markets Authority) has been examining the case over the past few months. Today, it decided to put a stop to the deal, preventing Microsoft from going ahead with its plans.
This is a shocking outcome
We know that was possible, but to be honest, we did not expect the CMA to take a position against the deal. Now, suddenly, after months of review, it has blocked the deal. The block seems to follow some concerns that Microsoft could make its franchises exclusive. However, unlike the predictions, it involves cloud gaming. It seems that the CMA decided to block the deal due to a possible impact on the cloud gaming sector. In today’s final report, the CMA states that Microsoft’s ownership of the publisher posed a risk to competition in this growing market. Of Course, nothing is over as MS can and will appeal.
MS states that this is a step in the wrong direction when it comes to the race for innovation. It claims that it has already signed contracts to make the games available on 150 Million more devices. In fact, the giant has signed a deal with many others in this space. The giant states that they’s ” particularly disappointed that, after lengthy deliberations, the decision follows a flawed understanding of this market”.
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Activision goes a little bit further and says that this decision is a “disservice to UK citizens who face increasingly dire economic prospects”. It goes on to point out that “the CMA’s report contradicts the United Kingdom’s efforts to become an attractive country in which to establish technology firms.
The problem is on the cloud
As the report notes, the CMA is seriously concerned with the giant’s position in cloud gaming. The Xbox Cloud is a powerful service and the CMA states that MS would “find it commercially beneficial to make the publisher’s games exclusive to its own cloud gaming service”.
The CMA further states that the firm’s large share of global cloud gaming benefits from ownership of Xbox, Windows, and Azure. Controlling franchises such as COD and World of Warcraft could harm competition in this space.
The CMA further notes that the cloud allows consumers to avoid buying expensive hardware. MS is growing fast, and giving them this edge would be risky for the rise of more opportunities (competitors).
The Xbox owner submitted a proposal to address the CMA’s concerns, the regulator notes. But these “remedies” did not go far enough. The CMA states that Microsoft’s deals with a 10-year promise to provide its games to other cloud gaming companies were ” behavioral ” remedies. They could contain a range of loopholes and would require ongoing enforcement. Therefore, the regulator decided to block the deal.
This is not an end just yet – Microsoft will appeal
The decision does come as a shock to the gaming industry. A few months ago, reports suggested that the CMA was “softening” its position. A draft document from last month indicated today’s positive outcome for the big MS. At that time, Sony reacted angrily to CMA’s position.
With the deal blocked in the UK, Microsoft will still have to go through two other major regulators. These are the US FTC and the EU Commission. We are curious to see what the results will be for these particular regulators.