Microsoft's $68.7 billion Activision buy has been killed by UK regulators

AppleInsider

Demonstrating a complete lack of understanding of the entire gaming market, UK's Competition and Markets Authority has officially declared that Microsoft buying Activision/Blizzard will result in reduced competition and won't be allowed.

In a ruling issued early on Wednesday morning, UK's Competition and Markets Authority (CMA) has blocked Microsoft's buy of Activision. The CMA still believes that Microsoft would find it "commercially beneficial to make Activision games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions)."

Despite a lengthy comment period, the CMA said that Microsoft "failed to effectively address the concerns in the cloud gaming sector." Furthermore, it noted that it was "not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows."

"Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming, CMA panel chair Martin Coleman said. "This deal would strengthen that advantage giving it the ability to undermine new and innovative competitors."

The CMA estimates that Microsoft already has around 60% to 70% of global cloud gaming services and also owns Xbox, which includes Xbox Cloud Gaming. Consequently, it believes the Activision deal could "reinforce this strong position and substantially reduce the competition" that Microsoft would otherwise face.

What happens next

It's not clear why the CMA has the viewpoint it does, nor if it fully understands the market it is addressing. Microsoft is not the dominant player in video gaming, nor is it at all clear if it has the majority stake in cloud gaming -- which in itself is a very small percentage of the overall gaming market.

Sony's PlayStation has a larger market share of the global console market as it stands in February 2023. And Microsoft said that it would use the fruits of the merger to take on Apple to increase competition, not decrease it.

Microsoft has also said to the CMA that it will continue publishing Activision titles on the PlayStation console for years to come. Doing otherwise would be an incredibly bad idea from a financial standpoint, as the market favors the competing console.

According to the CMA's own guidance reports, it has the authority to investigate mergers in specific circumstances. The proposed merger must mean that "two or more enterprises cease to be distinct," and also there is an impact on the UK market, such as the acquired company's annual turnover exceeding $83 million.

Following its investigating and reporting phases, the CMA has the ability to block a merger, acquisition, or joint venture. It can also require that businesses be sold off separately.

Other than the US Federal Trade Commission, which had not yet ruled, the rest of the world's regulators gave the deal the go-ahead.

Microsoft is expected to appeal the decision.

"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," Microsoft President Brad Smith said in a statement.

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TheCodingArt

They are inarguably doing the right thing here. This isn't about who the dominant player in gaming is. We're not looking to divide companies post-mortem. This is about potential to cause major damage. Microsoft has the will and the financial backing to cause irrefutable damage to the industry and WILL when enabled to do so.

rotateleftbyte

Since when has Apple been dominant in Console Gaming?
The article sounds more like an MS press release than an objective review of the situation.

I'm not a gamer (solitaire and sudoku excepted) or user of any MS product so I don't have any personal axe to grind here.

foregoneconclusion

Cloud gaming really has nothing to do with "competing" against Apple currently despite all the tech press hoopla. The vast majority of games that companies offer through the cloud were specifically designed for large screens, i.e., desktop/laptop or TVs. Sure, you can technically play them on an iPhone or iPad but the experience is definitely compromised and substandard relative to the large screens that the games were actually designed for. Microsoft doesn't want cloud gaming to be a substitute for buying Windows PCs or an Xbox. They're offering it as a supplement to those things with a lot of limitations attached. 

hammeroftruth

rotateleftbyte said:

Since when has Apple been dominant in Console Gaming?
The article sounds more like an MS press release than an objective review of the situation.

I'm not a gamer (solitaire and sudoku excepted) or user of any MS product so I don't have any personal axe to grind here.

It sounds more like an opinion piece, after reading the first paragraph. 

The author doesn’t mention how Microsoft took away Bungie’s Halo from the Mac after buying them out, or how some of Bethesda’s new titles are Xbox/PC only, or have backtracked on committing to make upcoming titles multi platform. 

Blizzard is one of the last big name developers who still makes AAA titles for Mac. I seriously doubt that if Microsoft buys them, that will continue long term. 

hmlongco

Totally agree with the UK in this case, and in general. We need to halt all of these corporate mega-mergers that only serve the needs to Wall Street and which reduce competition and consumer choice.

And which also tend to blow away tens of thousands of jobs all in the name of "efficiency".

mark fearing

I don't think the UK can kill this deal. It's just an opinion (I mean one countries opinion). Since so many other territories have already said it's OK. Not sure what happens next but the EU has not weighed in yet and in the U.S. it's not clear it will be pushed against. 

danox

If Microsoft wants to waste $69 billion, let them, AAA games won’t come to the Mac in any significant way until Apple actually gets serious about it, in the back of house software used to make games, also faster GPUs on the Mac wouldn’t hurt either, but both of those things aren’t instantaneous, and take time to develop as in years.

mike_galloway

mark fearing said:

I don't think the UK can kill this deal. It's just an opinion (I mean one countries opinion). Since so many other territories have already said it's OK. Not sure what happens next but the EU has not weighed in yet and in the U.S. it's not clear it will be pushed against. 

As Activision is a listed UK Company so this deal can be blocked by the UK alone.

tundraboy

Remember this: Whenever a company says its proposed merger will increase competition, they are lying through their teeth.

How in the world can competition increase when the number of competitors decreases?

beowulfschmidt

Maybe, maybe not.  MS/Xbox will like likely sue or try to reach an arrangment.  According to a lawyer following the case, the FTC's case is pretty weak, and doesn't seem to be following the law.  And EU still has to weigh in next month.

As well, Activision Blizzard issued a rather strongly worded reply to the CMA's decision in which they strongly implied that they might revisit doing business in the UK as a result.  I'm skeptical about that, but I can't imagine the UK is that big a market all by itself, so maybe they're serious.