The CMA has ‘prevented’ the proposed deal for Microsoft to acquire Activision Blizzard King due to cloud gaming concerns.
In a press release revealed today, the CMA has this to say:
“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.”
The CMA put in consideration factors such as the growing cloud gaming market in the UK, as well as the many advantages Microsoft has over competitors.
Again, in their own words:
“Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).
The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.”
The CMA also stated that they considered Microsoft’s proposed remedies, and ultimately decided that they were insufficient. They gave these reasons for the rejection:
- It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
- It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
- It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.
The CMA also considered the potential benefits of the merger. Ultimately, they decided that the benefits would not outweigh the potential harms. Therefore, the regulator has decided to reject the deal and its proposed remedies by Microsoft.
To sum, the chair of the CMA’s investigation Martin Coleman ended with this statement:
“Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”