News The UK regulator CMA has blocked Microsoft’s proposed acquisition of Activision Blizzard to protect innovation and choice in cloud gaming

[mazi]

Microsoft / Activision deal prevented to protect innovation and choice in cloud gaming

The CMA has prevented Microsoft’s proposed purchase of Activision over concerns the 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.

www.gov.uk

The CMA has prevented Microsoft’s proposed purchase of Activision over concerns the 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 final decision to prevent the deal comes after Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector, outlined in the Competition and Markets Authority’s (CMA) provisional findings published in February.

Microsoft entered into a $68.7 billion deal to buy Activision, one of the most popular video games publishers in the world, in January 2022. The CMA launched an in-depth review of the deal in September 2022, and in February 2023 provisionally found that the merger could make Microsoft even stronger in cloud gaming, stifling competition in this growing market.

 

[Mr.Fletcher]

Huge news. I mean, it's no Xenoblad DLC announcement, but it's very significant. Intrigued to see how this plays out.

 

[Christo750]

GOOD.

 

[ILikeFeet]

They really pulled a nonsense argument out of nowhere for an industry that doesn't practically exist yet.

Bravo

 

[9-Volt]

Great news! Huge blow to industry consolidation and I'll finally get to play Diablo 4 on my succ.

Also maybe that rumored Spyro sequel might live after all.

 

[Bonejack]

Downright dumb. I mean the UK already looks very unattractive for business ever since losing access to the EU market advantages, the CMA playing insulted orange won't help.

For real though ... if i was MS, i would call Acti and have our number people do some calcs if the UK market is important enough for having to deal with this shit.

I mean ... it's basically this:

ActivisionBlizzard: "We will NEVER put our big games on Cloud gaming services!"
MS: "If we can buy them, we will!"

CMA: "No MS, you can't. Despite being absolutely and 100%-tly clear that they won't ever do it, ActivisionBlizzard might just add their games to Cloud on their own one day!"


... Can i apply to work there? You don't seem to need any competencies and i always wanted an easy job where i can play games while at work.

 

[boodream]

They really pulled a nonsense argument out of nowhere for an industry that doesn't practically exist yet.

Bravo

We all know that this market is going to become increasingly important, so I don't see the point in pretending we don't know.

 

[Jencks]

Hilarious reasoning. Unfortunately this will just make the process even more protracted.

 

[mazi]

The UK regulator has blocked Microsoft’s acquisition of Activision Blizzard | VGC

The regulator has found the merger would lessen competition in cloud gaming; Microsoft says it will appeal…

www.videogameschronicle.com

In a statement, Microsoft’s president Brad Smith said the company was “disappointed” by the CMA’s decision and claimed it would appeal.

“We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.

“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain 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.”

Activision said it would work with Microsoft on an appeal and criticised the CMA for what it called “a disservice to UK citizens”.

“The CMA’s report today is a major setback for the UK’s ambitions to be a tech hub, and we will work with Microsoft to reverse it on appeal,” it said.

“This report is also a disservice to UK citizens, who face increasingly dire economic prospects, and we will need to reassess our growth strategy in the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is closed for business.”

 

[meatbag]

Reiterating my thoughts from IB: I think the CMA's argument is weak, but it's not completely flawed. So I don't expect any appeal to push through. I wonder what EU will say about this merger now.

And with this deal being effectively blocked, how will MS respond, aside from attempting to appeal? Will they become more aggressive in securing third party deals and so on?

EDIT: Already seeing lots of people saying that industry consolidation has been stopped. Which couldn't be farther from the truth hahaha.

 

[mazi]

i don't think appealing is going to work. microsoft's best bet is to just drop the deal, take the loss and spend their money elsewhere. they can't really pursue other acquisitions while this is still ongoing.

 

[ILikeFeet]

We all know that this market is going to become increasingly important, so I don't see the point in pretending we don't know.

Because we don't actually know this. You need to show some sign of growth, and while there is some, it's nothing that depicts "the future of gaming".

MS's side of the deal was to even put games on multiple cloud services. ABK has already shown reluctance in supporting services as they pulled their games from them already (GFN, whom signed a deal with MS to get ABK games). If anything, this just further prevents any growth in competition because ABK doesn't have to support anyone now

 

[Johnzyboi]

Objectively this is very funny considering someone’s PR team was putting out that it was a done deal a couple days ago.

 

[Bonejack]

i don't think appealing is going to work. microsoft's best bet is to just drop the deal, take the loss and spend their money elsewhere. they can't really pursue other acquisitions while this is still ongoing.

I'm not good at this stuff, but if the issue is Cloud gaming or Cloud generally ... wouldn't removing their Cloud services from the UK work since it would remove the one argument the CMA has?

 

[mazi]

I'm not good at this stuff, but if the issue is Cloud gaming or Cloud generally ... wouldn't removing their Cloud services from the UK work since it would remove the one argument the CMA has?

not sure, but i don't think MS would want to do that.

 

[Starphanluke]

Hahaha hell yeah.

The reason they use is dumb, but the less consolidation the better.

Now crack down on Activision and help the people there unionize.

 

[Bonejack]

not sure, but i don't think MS would want to do that.

Well it's a numbers game. Put up them scales to see how important the UK Cloud market is or will be compared to the access to more IP, King and so on.

Hahaha hell yeah.

The reason they use is dumb, but the less consolidation the better.

Now crack down on Activision and help the people there unionize.

The CMA couldn't care less how Acti treats their employees, especially the largest chunk of them being in the USA.

But thanks to the CMA it's now (at least for the time being) certain that Bobby "Devil" Kotick stays in power and will do his best to make their employees miserable!

 

[Dardan Sandiego]

CMA's argument is silly and Microsoft and ABK are going to appeal so it's probably too early to celebrate. But we've never been this back.

 

[Linkstrikesback]

Hahaha hell yeah.

The reason they use is dumb, but the less consolidation the better.

Now crack down on Activision and help the people there unionize.

Microsoft isn't just going to say oh shucks and give that money to charity or something, if they really get blocked from this, they're going to gulp up a huge number of other smaller studios instead. And smaller just means in terms of scale relative to Activision.

 

[mazi]

people are celebrating this but now that MS gets to keep the 70 billion they're still gonna spend it one way or another, most likely on publishers and developers that gamers care more about and regulators don't

 

[meatbag]

wouldn't removing their Cloud services from the UK work since it would remove the one argument the CMA has?

I don't believe so, since I believe CMA is also accounting for the effects of the merger on the global market.

The reason they use is dumb, but the less consolidation the better

This hardly stops consolidation. MS is gonna use that 70 billion for other things.

 

[Galgavias]

This is massively surprising. The reasoning does seem pretty flawed. There really isn't a Cloud based gaming hegemony at the moment and I can't see one being formed anytime soon. I could maybe have seen the logic in them wanting to prevent Microsoft grabbing the most lucrative franchises for themselves but given their commitment to keeping the likes of COD multiplat I really thought they would get it through.

This decision is going to have huge ramifications for the industry and it could lead to a lot of investors and companies getting massively spooked. Everybody is going to think twice before making such moves going forward. Going to have a big impact on the UK market for sure as publishers/developers will be seeing it as less reliable market if the authorities there are going to start getting heavily involved.

And I know many will be celebrating, but as I have said before, be very careful what you wish for.

 

[Dardan Sandiego]

people are celebrating this but now that MS has 70 billion they're still gonna spend it one way or other, most likely for publishers and developers that gamers care more about and regulators don't

noo ms don't buy ubisoft ur so sexy aha

 

[Bonejack]

I don't believe so, since I believe CMA is also accounting for the effects of the merger on the global market.


This hardly stops consolidation. MS is gonna use that 70 billion for other things.

Well i would love to hear the other (outside of the FTC) market regulators opinion about the UK's CMA making decisions "in their name".

I also would like to hear how the current UK Prime guy feels, iircs he's a full on "business business business" guy, and having that little board of angry suits making the UK look even less attractive for big business players with such decisions.

And ... yeah ... the outcome could get more ugly than how it would've been if MS "got" what it wanted.

 

[WestEgg]

people are celebrating this but now that MS gets to keep the 70 billion they're still gonna spend it one way or another, most likely on publishers and developers that gamers care more about and regulators don't

Yep. If it doesn’t go through, I think a Japanese publisher is going to get snapped up pretty quickly.

 

[Galgavias]

Well i would love to hear the other (outside of the FTC) market regulators opinion about the UK's CMA making decisions "in their name".

I also would like to hear how the current UK Prime guy feels, iircs he's a full on "business business business" guy, and having that little board of angry suits making the UK look even less attractive for big business players with such decisions.

And ... yeah ... the outcome could get more ugly than how it would've been if MS "got" what it wanted.

Yeah that's why I'm surprised it's the UK blocking this. Our economy is in the toilet and the last thing I'd have expected from the powers that be is to start picking a fight with one of the most powerful companies in the world when they're desperate for outside investment after Brexit screwed everything up.

But hey, picking a fight where one isn't needed seems to be my nation's raison d'etre these days.

 

[9-Volt]

people are celebrating this but now that MS gets to keep the 70 billion they're still gonna spend it one way or another, most likely on publishers and developers that gamers care more about and regulators don't

I mean... what's left out there for them to buy? They'll sure get blocked again if they attempt to take over EA, Take Two or Ubi (though Ubi getting acquired is pretty possible, just not by MS) and there aren't many independent big studios with valuable IP portfolio. IOI, maybe. They might go after WB's studios like Rocksteady but MS also wants the IP and back catalog to enrich Game Pass, so they might not worth their time. Much of WB's portfolio is licensed stuff.

On Japanese side, there are two publisher options: Capcom and Koei Tecmo. I don't see neither one wanting to be owned by MS.

 

[robertman2]

Mhm, I love waking up to the smell of Microsoft eating shit.

Well it's a numbers game. Put up them scales to see how important the UK Cloud market is or will be compared to the access to more IP, King and so on.



The CMA couldn't care less how Acti treats their employees, especially the largest chunk of them being in the USA.

But thanks to the CMA it's now (at least for the time being) certain that Bobby "Devil" Kotick stays in power and will do his best to make their employees miserable!

Don't fucking kid youself, Microsoft wasn't gonna make it any better for the employees. Places like 343 and Undead Labs are already shit holes to work at, and Microsoft does nothing to fix that

 

[Bonejack]

Mhm, I love waking up to the smell of Microsoft eating shit.

Don't fucking kid youself, Microsoft wasn't gonna make it any better for the employees. Places like 343 and Undead Labs are already shit holes to work at, and Microsoft does nothing to fix that

Okay, then tell me why the major unions in the USA are massively in favor for the aquisition?

It would've become better simply because Bobby "Union Bustin'" Kotick would've been out.

 

[Galgavias]

I mean... what's left out there for them to buy? They'll sure get blocked again if they attempt to take over EA, Take Two or Ubi (though Ubi getting acquired is pretty possible, just not by MS) and there aren't many independent big studios with valuable IP portfolio. IOI, maybe. They might go after WB's studios like Rocksteady but MS also wants the IP and back catalog to enrich Game Pass, so they might not worth their time. Much of WB's portfolio is licensed stuff.

On Japanese side, there are two publisher options: Capcom and Koei Tecmo. I don't see neither one wanting to be owned by MS.

If you own a decent sized Indie studio with a good reputation and a bankable IP, I'd start planning to move into a bigger house in the future.

Hey people like that Hollow Knight game right? Boop! Team Cherry bought by Microsoft for $100m.

 

[Starphanluke]

Microsoft isn't just going to say oh shucks and give that money to charity or something, if they really get blocked from this, they're going to gulp up a huge number of other smaller studios instead. And smaller just means in terms of scale relative to Activision.

This hardly stops consolidation. MS is gonna use that 70 billion for other things.

Wow then I guess no one should try to stop it then. Just let them do whatever they want!

 

[robertman2]

Okay, then tell me why the major unions in the USA are massively in favor for the aquisition?

It would've become better simply because Bobby "Union Bustin'" Kotick would've been out.

Because unions aren't paragons of virtue and be corrupt as well.

 

[Bonejack]

Because unions aren't paragons of virtue and be corrupt as well.

If that is your only argument ... it's a bad one.
It's basically "Whataboutism".

 

[Linkstrikesback]

Wow then I guess no one should try to stop it then. Just let them do whatever they want!

This isn't about stopping consolidation and won't be a meaningful slowdown of that for the industry at large, no matter how many sarcastic comments one makes on message boards.

 

[zumaddy]

The UK

 

[meatbag]

Wow then I guess no one should try to stop it then. Just let them do whatever they want!

Well you said "the less consolidation the better" and we're pointing out this doesn't really result in less consolidation. It'll still happen.

I'm actually fine with the deal getting blocked, I'm just not fine with the reasoning behind it. But that's for MS to tango with.

 

[Hero of Hyrule]

Good. Fuck consolidation on this scale.

 

[JazzPotatoes]

Yeah that's why I'm surprised it's the UK blocking this. Our economy is in the toilet and the last thing I'd have expected from the powers that be is to start picking a fight with one of the most powerful companies in the world when they're desperate for outside investment after Brexit screwed everything up.

But hey, picking a fight where one isn't needed seems to be my nation's raison d'etre these days.

The CMA is civil service, not party government.

Their rejection of the acquisition isn't because they're trying to woo the electorate, it's because of their stated concerns that cloud gaming is already at risk of becoming dominated by a few central key players (Google have already left the market) and purchasing ABK would essentially allow MS to force themselves into a monopolistic position before the industry has even taken off the ground.

If this sounds silly, remember that this is essentially what Microsoft already did to muscle their way into the OS market.

 

[Bonejack]

Well you said "the less consolidation the better" and we're pointing out this doesn't really result in less consolidation. It'll still happen.

I'm actually fine with the deal getting blocked, I'm just not fine with the reasoning behind it. But that's for MS to tango with.

At one point suits on such boards should ask themselves "If there are no reasonable arguments against the deal and we gotta make up some lukewarm based on flawed thinking, maybe the deal should pass?".

I mean, i, too, am against such aquisitions. Going so far that i even wouldn't want my fav game company (Nintendo ... in case it was unclear) to aquire ANYONE.
But for the lack of reasons it shouldn't pass ... who am i to decide where MS wants to burn their money on?

 

[2B]

Wasn't Microsoft's strategy to have gamepass available on all platforms? I can see cloud gaming being a concern looking at it from that perspective, but at the same time, cloud gaming does have potential to boom.

Despite MS acting like the good guy making offers to other companies to lessen the impact of the deal, they're in for the long term benefit and I'd never trust them to act responsibly in the end.

That said, personally, if they do eventually aquire something I'd probably prefer ActBlizz since they haven't appealed to me in a while.

 

[JazzPotatoes]

Well you said "the less consolidation the better" and we're pointing out this doesn't really result in less consolidation. It'll still happen.

I'm actually fine with the deal getting blocked, I'm just not fine with the reasoning behind it. But that's for MS to tango with.

MS has just posted a drop in gaming revenue and hardware sales compared to last year.

Their gaming sector was already going to be put under the microscope by the rest of the business following these results. Having a 70 billion deal get held up by the UK regulatory body is not going to entice their board of directors to try buying more big publishers. There's going to be some really tough internal reviewing going on about the money the Xbox department is spending against what it's bringing in.

 

[Brock Reiher]

I assume this doesn't actually change much? What are the steps to go around it in the UK? It's sad to see Jim Ryan called in a favor from his Tory friends, but I can't imagine the UK has enough power to stop this deal.

 

[Onilink97]

Because unions aren't paragons of virtue and be corrupt as well.

that is a silly argument, the employees were largely in favour of it as well. Bobby Kotick will now stay. Also, this was probably the only way you were going to get Activision's studios work on things other than COD

 

[Andre3333456]

What the heck, come on, I really want this over already.

 

[Galgavias]

The CMA is civil service, not party government.

Their rejection of the acquisition isn't because they're trying to woo the electorate, it's because of their stated concerns that cloud gaming is already at risk of becoming dominated by a few central key players (Google have already left the market) and purchasing ABK would essentially allow MS to force themselves into a monopolistic position before the industry has even taken off the ground.

If this sounds silly, remember that this is essentially what Microsoft already did to muscle their way into the OS market.

Even though the CMA is independent, I'm still surprised they've gone this far with it. I was expecting them to basically tell Microsoft to drop a few Dev studios, maybe even sell off COD so it becomes its own independent entity ala Bungee. Straight up refusing it seems quite extreme. It's a decision that's going to have consequences for big tech investment in the UK. Independent or not, I can't imagine that Rish! is going to be happy.

And while becoming the top dog in cloud gaming is no doubt their aim, I'm also not sold on the idea that buying Acti-Blizz would have single handedly given Microsoft a huge advantage in this sphere. It would have been a boost sure, but they would still need to overtake Nintendo and Sony to then force their services onto everyone else, like they did with Windows. They have a long way to go on that front even if the deal does go through.

 

[wrowa]

We all know that this market is going to become increasingly important, so I don't see the point in pretending we don't know.

Do we know that? This has been said over and over again since the Gakai days, but the only thing we've seen repeatedly over the past 15 years is companies trying - and customers not caring. It's rarely a good sign when tech that is supposedly "the future" is only pushed by companies but not actually in demand by people, because it opens the question if the tech is actually solving a problem, satisfying a need.

 

[boodream]

Because we don't actually know this. You need to show some sign of growth, and while there is some, it's nothing that depicts "the future of gaming".

MS's side of the deal was to even put games on multiple cloud services. ABK has already shown reluctance in supporting services as they pulled their games from them already (GFN, whom signed a deal with MS to get ABK games). If anything, this just further prevents any growth in competition because ABK doesn't have to support anyone now

I didn't use the phrase "the future of gaming", which you seem to attribute to me. I talked about the growth of the market, a reality you seem to agree with.

Generally speaking, the Microsoft acquisition project cannot be viewed through the prism of a single window. You have to look at the big picture, which means looking at the market as a whole. Microsoft does not spend that much money for the sake of spending. There is an industrial vision. This movement responds to various and complementary motivations, both for licenses (such as Call Of Duty), for the mobile market (with King), and for the Cloud. The specificity concerning the cloud is that Microsoft already has a major strategic position and is clearly anticipating what you call "the future of gaming".

 

[meatbag]

I assume this doesn't actually change much? What are the steps to go around it in the UK?

It changes a lot, actually. Historically appeals to CAT to reverse CMA's rulings have rarely succeeded.

Having a 70 billion deal get held up by the UK regulatory body is not going to entice their board of directors to try buying more big publishers.

That's true. But MS isn't going to sit on their cash. They'll definitely try to acquire other studios (especially since CMA's definition of "big" publishers only cordons off the likes of EA and Take-Two), or perhaps secure more exclusivity deals. They'll handily outbid cloud competitors over third party games.

Unless of course MS decides to shut down Xbox entirely, in which case... the console market becomes mostly consolidated to Sony and Nintendo.

"If there are no reasonable arguments against the deal and we gotta make up some lukewarm based on flawed thinking, maybe the deal should pass?"

That's the thing, though, the CMA's concerns are mostly based on speculation. And you can't really refute that, because you can indeed speculate that MS can technically, theoretically, monopolize the cloud market, if the cloud market takes off.

That's why I don't see the appeal doing anything, unless CAT's review finds a severe mistake in CMA's procedure.

 

[Brock Reiher]

It changes a lot, actually. Historically appeals to CAT to reverse CMA's rulings have rarely succeeded.

But at the end of the day, it the UK. They can probably just ignore it if they really have to yeah?

 

[meatbag]

But at the end of the day, it the UK. They can probably just ignore it if they really have to yeah?

... No. Unless MS wants to leave the UK market entirely. Which means pulling out even Windows. Which they won't do because that's way too much loss compared to gain.