Microsoft’s acquisition of Activision Blizzard – and therefore King – has been blocked by UK regulator the Competition and Markets Authority.
“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,” it said today.
Microsoft and Activision responded immediately to confirm that they’d be appealing.
Microsoft vice chair and president Brad Smith said: “We remain fully committed to this deal and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovations 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 Blizzard boss Bobby Kotick added: “This isn’t the news we wanted – but it is far from the final word on this deal.”
“Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition.”
“The UK hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that. At a time when the fields of machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately. By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.”
The CMA explained the decision further by focusing on Microsoft’s strength in the cloud gaming market, saying: “The evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.”
“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 deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.”
“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 chair of the independent panel conducting the CMA’s investigation, Martin Coleman, concluded: “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.”