The UK government’s Competition and Markets Authority has blocked Xbox’s acquisition of Activision Blizzard due to concerns about the impact on cloud gaming.
Cloud gaming concerns prompt UK government to block Xbox’s Activision Blizzard acquisition
After months of deliberation, the UK government’s Competition and Markets Authority (CMA) has blocked Xbox’s acquisition of Activision Blizzard as it has ruled that the deal would result in reduced innovation and less choice in the fast-growing cloud gaming market. According to the CMA, Microsoft’s deal “would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come,” the watchdog stated on its government website. Microsoft had failed to address the concerns the group had raised about cloud gaming, as the company already had a “strong position” in that market.
No business sense
The CMA did note that Microsoft making Activision Blizzard games like Call of Duty exclusive to its consoles didn’t make any business sense. It stated that “the deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft.” However, the regulator was unequivocal in blocking the deal, citing that the potential harm created by the loss of competitive pressure on Microsoft’s cloud gaming business could not be sufficiently mitigated.
Microsoft to appeal
Microsoft has already announced its intention to appeal the verdict. In a statement, Microsoft president Brad Smith said that the company had already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices and that it remained committed to reinforcing these agreements through regulatory remedies. “We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works,” he added.
Good for competition
Bobby Kotick, the CEO of Activision Blizzard, said in a statement that Microsoft and Activision Blizzard are confident in their case, adding that the deal is “good for competition” and will ultimately help the UK grow its leadership position in technology. Activision Blizzard said that the CMA’s report “contradicts the ambitions of the UK to become an attractive country to build technology businesses,” and that the report’s conclusions are a “disservice to UK citizens” who are already under intense strain from “dire” economic prospects.
Reassessing growth plans
The company also stated that it would reassess its growth plans for the UK, adding that global innovators, large and small, would take note that the UK is “closed for business,” despite all its rhetoric. The move to block the acquisition does call into question the UK’s credibility as a technology hub, as Microsoft’s acquisition would have been the largest ever in the industry, although the CMA’s decision indicates that regulators are not prepared to compromise on a competitive market, nor will they be swayed by Microsoft’s reputation and deep pockets.
The potential impact on gaming
Microsoft’s deal would have enhanced its dominance in the gaming industry, which is already at risk of becoming increasingly concentrated as a few large companies consolidate. The gaming sector has seen several large-cap deals recently, and the acquisition was set to be one of the biggest in gaming history. However, games like Call of Duty are played by tens of millions of people worldwide, and the fear is that if Microsoft were to obtain exclusive rights, many gamers would be forced to use Microsoft’s services, rather than alternatives offered by companies like Sony, Nintendo, and even PC game services like Steam. This would reduce choice for gamers and, in turn, could stifle innovation in the industry.
Conclusion
The UK government’s Competition and Markets Authority has decided to block Xbox’s acquisition of Activision Blizzard due to concerns about the impact on cloud gaming. Regulators are not prepared to compromise on a competitive market, nor will they be swayed by Microsoft’s reputation and deep pockets. Although the acquisition would have been the largest ever in the industry, the decision shows that the UK is not closed for business, and it is committed to retaining its position as a technology hub.
