The UK competition regulator, the Competition and Markets Authority, has blocked Microsoft’s $75 billion acquisition of Call of Duty creator Activision Blizzard in order to protect innovation in the burgeoning cloud gaming business, thereby killing the software giant’s largest-ever deal.
On Wednesday, the Competition and Markets Authority stated that it felt Activision would be monetarily driven to make its games exclusive to its own cloud gaming service, and that Microsoft had failed to address its concerns.
"We remain fully committed to this acquisition and will appeal"
Microsoft
The decision comes after the regulator backed down on a crucial issue in February, appearing to clear the way for the two parties to proceed with the acquisition.
The companies intended to satisfy the CMA that licencing agreements agreed with cloud gaming platforms would be enough to clear the merger.
The UK cloud gaming sector is experiencing rapid expansion. The number of monthly active users in the UK has seen a threefold increase from early 2021 to late 2022. Projections suggest that the worldwide market could be valued at around £11 billion, with the UK’s share reaching £1 billion by 2026. To put this into perspective, the UK’s recorded music sales in 2021 totalled £1.1 billion.
Microsoft enjoys a robust standing in the realm of cloud gaming services, and the evidence obtained by the CMA suggests that the company would likely benefit commercially from making Activision’s games exclusive to its own cloud gaming platform.
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Microsoft is responsible for an estimated 60-70% of the global cloud gaming services market and possesses additional key advantages in this space, including ownership of Xbox, the leading PC operating system (Windows), and an extensive cloud computing infrastructure (Azure and Xbox Cloud Gaming).
The proposed acquisition would solidify Microsoft’s dominance in the sector by granting it control over significant gaming content such as Call of Duty, Overwatch, and World of Warcraft. CMA-acquired evidence implies that, without the merger, Activision would likely begin offering games via cloud platforms in the foreseeable future.
The cloud provides UK gamers with the opportunity to forgo costly gaming consoles and PCs, granting them increased flexibility and choice in their gaming experiences. Allowing Microsoft to secure such a commanding position in the burgeoning cloud gaming market could potentially jeopardise the innovation vital for the evolution of these prospects.
