UK Blocks Microsoft's Activision Blizzard Acquisition, Microsoft to Appeal Decision - News
by William D'Angelo , posted on 26 April 2023 / 5,409 Views
The UK regulator, Competition and Markets Authority (CMA), has released its final decision on Microsoft’s $67.8 billion acquisition of Activision Blizzard and decided to block the deal over concerns with cloud gaming.
The CMA is concerned 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 CMA states that "Microsoft has a strong position in cloud gaming services and 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 CMA said Microsoft submitted behavioral remedies to address concerns, which the regulator examined in depth. The conclusion is the proposed remedies "contained a number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services." The shortcomings included the following via the CMA press release:
- 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.
"Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market," reads the press release.
"Accepting Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA. By contrast, preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention."
The Vice Chair and President of Microsoft Brad Smith in his own statement said that Microsoft remains fully committed to its acquisition of Activision Blizzard and will appeal the decision by the CMA.
"We remain fully committed to this acquisition and will appeal," said Smith. "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."
An Activision Blizzard spokesperson in a statement to GamesIndustry added, "The CMA's report contradicts the ambitions of the UK to become an attractive country to build technology businesses. We will work aggressively with Microsoft to reverse this on appeal.
"The report's conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that - despite all its rhetoric - the UK is clearly closed for business."
We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ
— Brad Smith (@BradSmi) April 26, 2023
Activision Blizzard CEO Bobby Kotick in an email sent to the company said the CMA decision is "far from the final word on this deal." They will work alongside Microsoft to "contest this decision" and have "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," said Kotick.
"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.
"This merger is a complex process, and I know I’m not the only one frustrated by the hurdles and delays. We’re accustomed to a company culture that moves quickly to accomplish big goals, so it’s tough when we can’t close things out at our usual energetic pace. We’ll keep pressing our case, because we know that this merger will benefit our employees, the broader UK tech workforce, and players around the world.
"I’m going to do everything I personally can to advocate for us and help regulators understand the competitive dynamics in our industry. What gives me confidence is that, whether on our own or united with another company, we are one of the strongest companies in our industry, poised for continued growth, and building on our incredible IP.
"I appreciate your continued hard work and focus, and for continuing to connect and engage our players around the world. This is the best time to be in our field, and you all represent the best of our industry. We’ll be sure to keep you updated on next steps as they happen."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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A lot of people here are gonna be angry. I'm actually impressed with how detailed and knowledgeable the CMA has been with explaining this decision. Their reason against it is very specific and they also recognize that all these 10 year deals Microsoft gives out to the cloud services are for purely cloud delivery that you'd have to still pay for content separately (e.g. Nvidia) , not for things like Xbox Game Pass which is a "multigame subscription". I thought Microsoft would be able to conflate and confound the two with the charm offensive, but the CMA saw through the limitations.
I'm so glad this happened. I'm tired of the industry consolidating the way it has been. This is going for both sides. I don't mind smaller studios but leave the big studios a lone.
Shocker. I still think it will pass in the end, it's just the world we live in.
And as a UK citizen, I don't want to buy a PC to play games that I can already play on my PS5 just because MS decides to take them away. So, blocking the deal means money saved as far as I am concerned, ABK doesn't speak for me.
Even if it's still not final, but my greatest respect to Sony, who had their balls against all media hatred and remained steadfast to the end and didn't sign a deal! Respect!
Thanks for jinxing it Michael Pachter
So very true, thanks for blocking this stupid deal Pachter!
Micheal is the only one getting anything crammed down his throat today.
He's a menace to gaming as a whole.
His prediction killing more companies than Google is the actual threat to the competition and fair market
If we're lucky he'll be fired and never allowed to make predictions again.
What a plot twist!
Grabs popcorn the saga continues
Good. Now may be Microsoft can learn to instead of throwing a lot of money (which they have) to dominate an industry, they actually need to put in the hard work and innovation to become #1.
That was a very dangerous game you played Jim. A lesser man would have been crushed by the burden.
No can Activision do the right thing and get rid of Bobby
Great job, CMA
Great news!! This s@#$ needs to get blocked!!
Another michael patchter prediction going down the drain.
Hilarious attachment to Xbox some people have. Their fan base is exactly one of the reasons people despise MS.
Damn.. so this is not over yet.. I really wish Microsoft would just drop this and go back to buy independent studios. I see the why they want Act/Blizzard but I don't think it is worth the hassle (nor the money).
Can we just get this stupid saga over with already?.
it's getting worse than edited re-runs of DBZ
I feel like they didn't do a stellar job with S2, and that they've had to wait for David productions to clear their schedule, in hopes they can hire them again.
it is definitely insane how it's been nearly a decade of OPM, and we've only had 2 seasons, while Mob Psycho has had like 3, and a bunch of minisodes, and I believe it's getting a movie too?.
I’ve been enjoying all the meltdowns online from this today especially after all the smug comments after the CMA addendum last month. Florian in particular and then seeing Lulu delete her tweets this morning I knew something was up. I am hoping we hear less from that crazy nutcase from here on out. We all knew those 10 year deals were just PR stunts and thankfully the CMA saw through that BS. Hopefully the EU is next for this one. It’s funny watching the flip flops today though. Last week the appeals wouldn’t likely work and now all of the sudden CAT is going to be everyone’s hero. Now begging for money hats etc. People are panicking! One thing that is definitely sure now is that the NY Times was wrong and MS isn’t closing this anytime soon. Get your $70 US dollars out if you want to play Diablo 4.
Great fucking news, hope now europe blocks this shit too. But i dont think we see the end of this everytime soon.
The whole Sony thing has been just a cover for MS, what they are really after is absolute domination in the cloud business. Add to that the fact that they are practically a monopoly in the PC OS field. "But Sony is so massive and huge in the games that we can't compete!" Hilarious.
When they go there and say that their main competitors is Google and Amazon.... I guess for all the people saying Sony opened the door to fuck themselves when they said to FTC that the market was just Xbox and PS they will say that MS opened the door to fuck themselves when saying their competitors are Google (defunct on streaming) and Amazon (irrelevant share?).
Huh, could have sworn it would go the other way. Ah well, onwards we go. Can we get back to making and announcing new games yet?
eeeerrrr wasn't the rumor that MS would do the deal anyway and not care about USA because they were sure UK would approve and EU would move on right next?
Uh-huh. And there was also the rumor that the deal would be approved this week.
That is why I love "insiders" so much /sarcasm kkkkkk
Colour me surprised. Was expecting this to go thru.
However this is now an even better opportunity for MS. As they said to Sony, anyone can make a COD rival in 10 years. Considering this is so easy to do, this is what they need to focus on.
🤣
Its a warp. No way MS will convince CAT that the CMA did something illegal to block this deal.
MS is too big in cloud and Sony is too big in console, so in one swoop the cma pretty much telling ms they cant buy a pub to grow their cloud business and also telling Sony they cant buy a pub to grow their console business.
Sony would be in very hard position to buy a big publisher anyway =p just dunno if Capcom or SE would be allowed (not that I want them to try).
I wonder if the FTC will/can pivot their arguments to this point as well? I've been thinking this angle for a while. It was very clear from their previous "google and Amazon are our competitors" comment a while back that the end goal wasn't to sell more hardware. They want to pull together so much industry ip that if you want to play any noteworthy ip you'll need to subscribe to their service. In that regard who really cares how they make all these deals to bring titles to other platforms, when the caveat is that you still need to throw them money as well? I'm picturing something like the Stars addon for Amazon prime if you have something other than gamepass.
Gamers rejoice. Free drinks on the house.
Nonsensical decision. Makes no sense whatsoever.
Edit: I'm not some xbox fanboy. I've owned every sony home console. This deal going through would have been great for gamers because xbox being more competitive with playstation forces them to put more effort in and get more creative. The further xbox falls behind the more stagnant the industry will become.
This is MS's PR is working on you, really. They managed to convince you that the only they can become competitive is by forcing the largest merger in tech history to happen. MS apparently can't build their own studios, they can't attract talent, they can't innovate, they can't step up, they can't admit that it's their own mistakes for mismanaging the xbox brand for over a decade, nooo, buying ABK (and many others) is the only way they can step their competition, apparently. Give me a break.
Well Said! Perfect words!
Building up studios can takes years upon years. Id rather if they capitalised on the 360 era and stayed competitive but they made mistakes and fell behind and now may fall even further behind. We're already seeing the negative effects of sony dominating, they led the charge for increased game prices and even increased the price of the ps5 after launch, do you think this would have happened if marketshare was 50/50
They had almost 10 years with Phil Spencer, plenty of time to build studios, have they done it?
In the same timeframe how many small studios Sony fostered and integrated?
You literally just read the first sentence of my comment and immediately replied didn't you.
I did read all of it, still doesn't refuse the point that Phil had both money and time to solve the problem without purchase.
OK so the comment is just redundant then. I mentioned that in the comment you are replying to.
By foster U mean paying for permanent timed exclusive over generations?. Isn't that just as and as buying someone out
Nope, I'm meaning Insomniac, Housemark, Firesprite, etc. Companies that had either long term ties with Sony or have been started basically with Sony money them got integrated.
Games from insomniac started in early days with ratchet and Clank which Sony at the time paid for permanent exclusives for generations. That started from the PS2 era. Same with housemarque when they developed superstardust had and resogun.
According to google it's the same with firsprute as they started making games for Sony in 2013. Paying for permanent exclusive for generations has always been Sony strategy. To me that's August as bad as buying a big publishers. Only difference is that buying big publishers speeds up increasing your first party library while the other way takes time
Sony didn't pay for R&C exclusivity, Sony always owned the IP.
In case you don't know the reason Sunset Overdrive gone to Xbox instead of PS was because Insomniac wanted to retain the rights to IP and at the time Sony only paid for titles that they retained the IP.
I would bet that all the cases you cited were similarly not Sony paying for the game to not go to other platforms for generation but they owning those IPs from the start and those devs being what is called 2nd party. Bloodborne is likewise similar case.
Yes, I do think the game prices would have increased. Game production costs have been rising for years, which is why you see so many of the monetization practices that people hate. Sony was just the one who bit the bullet. Microsoft could have taken a stand and said that $60 was the ceiling on Xbox Series. That could have been their "how to share PS4 games" moment. Instead, they let Sony take the bad PR and followed suit once gamers had gotten used to the idea of $70. If anything, the Xbox selling poorly should have been an incentive for Microsoft to undercut Sony, not the other way around.
They would eventually, but it would likely have not happened as soon. Games are selling better than ever, massive increase in digital sales, subscriptions, ultimate editions, dlc, micro transactions. Increasing prices was greed and nothing else. They only did it because they knew they could get away with it. Exact same thing would have happened if Microsoft were in sony's position. But if there was a 50/50 split, neither would be able to take the pr hit. I find it crazy that some people are arguing against competition here, I understand not liking buying big publishers but trying to make the argument that competition isn't good for consumers is just insane.
They aren't doing these monetisation practices because of rising costs, they are doing them for pure greed, because they can get away with it. These companies are making more money than ever before.
Well ps1/2 sony heavily relied on 3rd parties. Early ps3 was coming off the massive success of ps2, late ps3 was sony going all out after losing massive marketshare, ps4 was coming off the disappointing sales of the ps3 so sony wanted to make up for that. Ps5 is coming off the very successful ps4 and sonys output is very lacking, iterative sequels to very successful ps4 games and currently going through a big drought of 1st party games. Ragnarok came out almost 6 months ago and the next big game spider man 2 doesn't even have a solid release date yet.
I didn't really want this to go through, but I'm also not quite sure I buy the argument. The difficulty in anti-trust law is in defining a market. I don't think that Cloud gaming should be considered its own market. Or that if it is this merger would make that market uncompetitive. To the extent that cloud based gaming is going to be in demand, I don't think it's going to be used for primarily multiplayer gaming (like COD) which demand a strong connection or games like Candy Crush which are small enough to be downloaded.
I'd have to read the decision in depth. But, I see the value of Activision more in the subscription gamepass model which is related but distinct from Cloud gaming.
MS better start with the apologies. Sorry ABK, Kotick remains in Power, Sorry Nintendo, CoD wont be coming to N platforms, Sorry Streaming services, you wont be getting MS/ABK games now.
This is taking too long and I believe MS have already showed remedies for everything. Vodafone-Mannesmann's took 3-4 months ($200 bi)
Money is all that matters to Microsoft.
They don't produce legendary games or games with great attention to detail and effort like Sony/Nintendo. That's why they can only do one thing: buy the biggest publishers along with all their games.
We should all boycott such a club. Even Shinji Mikami left his own company because he doesn't want to work at Microsoft. Some employees report soulless work.
What's it like to spout absolute bullshit nonstop? I'm very curious, lmao.
Dude you are gonna get dogpiled for speaking truth.
Say's a guy that never owned a Microsoft console.
Money is all that matters to any corporation that is basic capitalism. I you think otherwise you are super naive or living in a fantasy world.
Dude, your thought process doesn't make sense
- All companies only care about money, you're kidding yourself if you think otherwise
- Quality is subjective, MS have plenty of highly rated games, what makes not legendary in your eyes? Have you even played them?
- Mikami announced he was going to retire long before
Only thing that is soulless is your takes on anything xbox related, you act like an empty husk that's being paid by Sony themselves. Jesus people
Wait a minute. So at the end they're concerned with cloud gaming and gaming on Windows? Oh lol. I expected to see some more "down to earth" reasoning TBH. I guess the only good thing from this, if the appeal goes through, might be more games from MS umbrella on Linux and MacOS
That sure was a surprise.
The CMA wins the gold medal in mental gymnastics.
