UK allows Microsoft's Activision deal with token change over cloud gaming
The UK has reversed its ruling over Microsoft buying Activision, touting a trivial revision about cloud gaming that it claims to be a big deal.
Even Microsoft described the UK's Competition and Markets Authority (CMA) as having a "flawed understanding of this market and the way the relevant cloud technology actually works." But that grasp of the cloud may be what has led to the new deal being approved.
The UK now says that Microsoft can buy Activision, but the latter's cloud gaming rights must instead go to the independent firm, Ubisoft.
"With the sale of Activision's cloud streaming rights to Ubisoft, we've made sure Microsoft can't have a stranglehold over this important and rapidly developing market," said Sarah Cardell, Chief Executive of the CMA, in a statement. "As cloud gaming grows, this intervention will ensure people get more competitive prices, better services and more choice."
"We are the only competition agency globally to have delivered this outcome," she continued. "We delivered a clear message to Microsoft that the deal would be blocked unless they comprehensively addressed our concerns and stuck to our guns on that."
Cardell also criticized Microsoft and warned that other businesses should not emulate it. "[They] should be in no doubt that the tactics employed by Microsoft are no way to engage with the CMA."
"Microsoft had the chance to restructure during our initial investigation but instead continued to insist on a package of measures that we told them simply wouldn't work," she said. "Dragging out proceedings in this way only wastes time and money."
By giving up cloud streaming rights to get the deal, though, Microsoft has effectively lost little -- or nothing. Cloud gaming is a small percentage of the overall market, and despite the CMA believing a risk that Microsoft could dominate, the company has only limited stake in cloud gaming.
The CMA did have other issues with the deal, as it identified "limited residual concerns." Still, it accepted Microsoft's "undertakings that will ensure that the terms of the sale of Activision's rights to Ubisoft are enforceable by the CMA."
While the UK originally blocked the deal, the European Union approved it in May 2023. Other countries also approved it, although the US Federal Trade Commission did try to prove such a deal would be anticompetitive.
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In this the CMA has acted correctly, taking expert advice that the cloud aspect of the gaming market is in its infancy and to hand Activision to Microsoft would be anti-competitive in an emerging market. The CMA told Microsoft so early on but Microsoft's lawyers lawyers thought they could get around the CMA. They failed.
What appears to be insignificant today can end up with the likes of Windows dominating personal computing for decades.
Well done the UK CMA.
https://vgsales.fandom.com/wiki/List_of_highest-grossing_video_games
Call of Duty (Activision) + World of Warcraft (Blizzard) + Candy Crush (King)
Each subsidiary makes around $2-3b revenue per year from these franchises.
Call of Duty is a strong enough franchise (up to 30m units per game) that it would cause players to switch platforms if it was exclusive:
https://gamerant.com/highest-selling-call-of-duty-games-ranked-by-amount-sold-world-at-war-modern-warfare-black-ops/#call-of-duty-black-ops-30-72-million
Candy Crush has 250m active players.
But the same is true of franchises owned by Sony like Uncharted, God of War and their exclusive Final Fantasy agreements. This purchase makes Microsoft as strong with exclusive franchises as Nintendo and Sony.
https://www.statista.com/statistics/1197213/market-value-of-the-largest-gaming-companies-worldwide/
It was reported that Microsoft made offers to a few companies on that list and even talked about buying Nintendo.
https://www.theverge.com/2023/9/19/23880146/phil-spencer-microsoft-xbox-acquiring-nintendo
https://ycharts.com/companies/ATVI/market_cap
https://ycharts.com/companies/NTDOY/market_cap
There will be more consolidation in the industry and it's better that Western companies merge than being taken over by companies like Tencent and NetEase. This merger will move Microsoft to 3rd place behind Tencent and Sony:
In my opinion, the trademarks of "Activision" and "Blizzard" have been bogged down by scandals for several years, so Microsoft may be best advised to dump the names, but to keep those trademarks in their back pockets for possible future use. Perhaps Microsoft can keep the word "BlizzCon" for the annual conference. "MicrosoftCon" has a negative sound.
I don’t know why people (usually in the USA) like to say buy Sony buy Nintendo, buy Nikon or suggest someone buy a company in South Korea, or dare I say it, China, or casually suggest BMW, Mercedes, Porsche, Volkswagen, those companies probably will never be sold to anyone who is outside their country, Microsoft can ask (stupid) until the end of time they’re not gonna get their hands on Nintendo, and if they do one has to ask what is the catch more so than any other acquisition that Microsoft has ever done in their history.