Topline
Britain’s antitrust watchdog on Wednesday said it will block Microsoft’s $69 billion takeover of gaming heavyweight Activision Blizzard over concerns the deal will stifle competition in the budding cloud gaming sector, dealing a potentially lethal blow for one of the biggest tech deals in decades and a major setback for the software giant as it struggles to convince other regulators to back the deal.
Call of Duty is one of Activision’s biggest franchises.
Key Facts
Britain’s Competition and Markets Authority said Microsoft had failed to allay concerns that its acquisition of one of the most popular video game developers in the world—known for franchises including Call of Duty, Overwatch and World of Warcraft— would stifle competition in the growing cloud gaming market.
Cloud gaming effectively enables gamers to access content remotely and without the need to buy expensive consoles and is poised to disrupt gaming in a similar manner to how companies like Netflix and Spotify disrupted film and music.
The regulator said evidence showed Microsoft, which is already a strong player in the field, “would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service” and further strengthen its position.
Allowing the company “to take such a strong position” as the sector takes off “would risk undermining the innovation,” it added, noting that the deal “would alter the future of the fast-growing cloud gaming market” and lead to less choice for consumers.
Microsoft, which had submitted proposals to address the regulator’s concerns, slammed the decision and Brad Smith, Microsoft vice chair and president, said the watchdog’s decision rejects “a pragmatic path to address competition concerns” and reflects a “flawed understanding of this market.”
Smith said Microsoft “remains fully committed” to the deal and plans to appeal the CMA’s decision.
Crucial Quote
In an email to staff, Activision Blizzard CEO Bobby Kotick said the CMA’s ruling is “far from the final word on this deal.” The company can and will contest the decision, he said, adding that steps are already in motion to do so. “We’re confident in our case because the facts are on our side: this deal is good for competition,” Kotick said. Should the decision hold, Kotick said it will “stifle investment, competition, and job creation throughout the U.K. gaming industry.”
News Peg
Microsoft announced plans to acquire Activision for around $69 billion in early 2022. The deal marked a major push for the Xbox maker to shore up its gaming position and would have been its biggest ever. The deal has been savaged by Microsoft’s gaming competition, notably PlayStation maker Sony, which fears it could lock content like Call of Duty away from users on its platform. Other regulators, including the Federal Trade Commission, are also scrutinizing the deal closely and have yet to give it the greenlight. This means Microsoft still has hurdles to clear if it does manage to overturn the CMA’s decision.
Further Reading
Sony Lashes Out At Government For Not Shutting Down Microsoft Activision Deal (Kotaku)
Microsoft plans swift end to FTC’s Activision Blizzard deal concerns – report (Eurogamer)
Source: https://www.forbes.com/sites/roberthart/2023/04/26/microsofts-69-billion-takeover-of-activision-blizzard-blocked-by-uk-regulators-dealing-massive-blow-to-its-gaming-plans/