2023 has not been a great year so far for Microsoft / Xbox.
January 2022, the video game world was hit with a megaton bomb when news broke that Microsoft was acquiring Activision Blizzard for an astounding $68.7 billion.
Since the announcement, this acquisition has been a pain in the side of Microsoft, thanks to PlayStation CEO Jim Ryan doing what he is supposed to do as a direct competitor to Xbox by mudding up this deal and making it look very unfair. Well, for the most part, it seems like Ryan’s strategy is working because the UK has blocked the deal, mainly due to Cloud Gaming.
The UK government’s Competition and Markets Authority’s website announced the bad news. “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 said.
Microsoft Will Appeal
Microsoft says it will appeal the UK’s decision, adding that it was “disappointed” and that it “appears to reflect a flawed understanding of this market.”
Brad Smith, vice chair and president of Microsoft, chimed in:
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 Blizzard’s embattled CEO echoed those sentiments in an open letter claiming the CMA’s decision “is far from the final word.” He vows to join Microsoft in their appeal to the decision adding, “We’re confident in our case because the facts are on our side: this deal is good for competition.”
Microsoft’s Moves Didn’t Help Ease The CMA’s Initial Concerns
Before the UK’s decision, Microsoft feverishly made many moves to ease concerns about the acquisition. The CMA knocked down original claims about XBOX making Call of Duty exclusive to its consoles calling, saying it wouldn’t make sense, but they did reach that conclusion regarding cloud gaming.
According to the CMA, “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.”
“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.”
This is a significant blow to the deal, and things are not as rosy stateside. The Federal Trade Commission sued Microsoft to block the deal, with a trial going down sometime later this year.
So there is a strong chance the FTC also moves to block the deal as well.
Photo: Anadolu Agency / Getty