The UK Competition and Markets Authority has rejected Microsoft’s $69 billion deal to buy Activision Blizzard. The UK CMA said the deal would “harm competition in the cloud gaming market.”
In its press release, Microsoft currently controls between 60 and 70 percent of the cloud gaming market, the CMA said. In addition to owning the Xbox business, CMA points out that Microsoft also has significant PC operating systems in Windows, along with its Azure and Xbox Cloud Gaming infrastructure.
He added:
The deal will strengthen Microsoft’s market advantage by giving it control over key gaming content such as Call of Duty, Overwatch and World of Warcraft. Evidence available to the CMA indicates that, in the absence of a merger, Activision will begin delivering games via cloud platforms in the near future.
The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them more flexibility and choice in how they play. Allowing Microsoft to take such a strong position in the cloud gaming market as it begins to grow would risk undermining the innovation that is critical to the growth of these opportunities.
While the CMA stated that Microsoft offered remedies for this situation, they did not address certain areas in accordance with the CMA’s rules:
- It does not adequately cover the various cloud gaming service business models, including multi-game subscription services.
- It was not open enough to providers who wanted to offer versions of games on PC operating systems other than Windows.
- It would standardize the terms and conditions on which games are available, as determined by the dynamics of competition and creativity in the market, as would be expected in the absence of mergers.
The press release also cited Martin Coleman, who chaired the independent panel of experts brought in by the CMA to investigate the merger. He stated:
Cloud gaming needs a free, competitive market to drive innovation and choice. This is achieved by allowing the existing competitive dynamics in cloud gaming to continue to operate.
The decision is a major blow for Microsoft, and it remains to be seen what the company will do after this rejection by the UK CMA.
