Unless you have been living entirely off the grid, you will be well aware of Microsoft’s $69 billion bid to acquire Activision Blizzard. The latest in the ongoing saga comes as the Competition and Markets Authority (CMA) has blocked the acquisition.
The CMA today officially blocked the deal – believing it to harm the growing cloud gaming market. The UK expressed their concerns over the acquisition by claiming it 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.“
It’s interesting that cloud gaming is playing a central role in this decision.
Why the CMA says No
The CMA began a deep investigation into the proposed deal in September 2022. It has found the cloud gaming market to be growing exponentially. Active monthly cloud gamers in the UK more than tripled from the start of 2021 to the end of 2022. Microsoft, being the owner of Xbox and the leading PC operating system, controls the majority of the cloud userbase as it stands today.
The CMA believes Microsoft would increase their control should the acquisition go ahead, and significant titles from Activision Blizzard (Call of Duty, Crash Bandicoot, Overwatch) were to become Xbox exclusives down the line.
The CMA believe that, if this were to happen, it would restrict choice for consumers and make it more challenging, if not impossible, for other cloud gaming platforms to compete with Microsoft.
Microsoft’s Moves
In recent months, Microsoft has signed contracts and inked deals with cloud gaming competitors such as Boosteroid and GeForce NOW. In these deals, Microsoft committed to making their games available on these competing services for a period of at least ten years. In this way, Microsoft has been attempting to show goodwill by ensuring that titles such as Call of Duty will not be Xbox Cloud exclusives any time soon.
According to the CMA, however, this is not enough. The deals that have been made are insufficient evidence that Microsoft will not monopolise the cloud gaming space and that it will remain a free and fair market. In particular, the CMA claims to have found the following deficiencies in Microsoft’s approach:
- (Microsoft) did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
- (Microsoft) 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.
We assume by the first bullet point that the CMA is referring to cloud game subscriptions like Blacknut, Utomik and Luna+. The second bullet point likely refers to the potential of games to run on Linux in the cloud.
What Now?
This is not the end of the acquisition just yet. Microsoft and Activision are already planning and appearl and there are other governing bodies globally that may or may not oppose the deal – the EU is set to weigh in next month. Only time will tell whether Microsoft can complete the acquisition. It is fair to say that other regulators, the FTC in America, for example, will be looking at the report and findings from the CMA, as well as their ruling, before giving their verdict on the matter. You can be sure that we will be reporting whatever happens next.
Do you think the merger would be beneficial to gamers? Let us know what you think.
