Microsoft's $69-Billion Acquisition Of Call Of Duty-Maker Activision Blizzard Blocked By Britain: Here's Why

The CMA believes that Microsoft could leverage its market position in cloud gaming to make Activision's games exclusive to its Xbox Game Pass platform.

The Competition and Markets Authority (CMA) of the United Kingdom has moved to prevent Microsoft from acquiring Activision Blizzard, a major video game publisher. This decision is a significant setback for Microsoft, as it tries to persuade regulators that the acquisition will boost competition. The UK regulator has raised concerns about the potential impact of the deal on the emerging cloud gaming market. The CMA believes that Microsoft could leverage its market position in cloud gaming to make Activision's games exclusive to its Xbox Game Pass platform, shutting out other players in the industry.

Cloud gaming is a technology that allows gamers to stream games via remote servers, much like Netflix streams movies. Although it is still in its early stages, Microsoft is betting heavily on cloud gaming becoming a mainstream way of playing video games. The CMA stated that Microsoft's dominant position in cloud gaming services could be used to make Activision's games exclusive to its own cloud gaming service, potentially hampering innovation in the nascent cloud gaming market.

Microsoft proposed remedies to address the CMA's concerns, including requirements governing the distribution of Activision's games to different platforms and conditions for a ten-year period. However, the CMA rejected these proposals, stating that there were significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly in a rapidly changing market.

In January 2022, Microsoft announced its plan to acquire Activision Blizzard for $69 billion, which is one of the largest deals in the video game industry to date. The acquisition would add popular franchises like Call of Duty and Candy Crush Saga to Microsoft's content offerings. However, Microsoft's competitors raised concerns that the deal would give the company too much power in the $200 billion games market. They were particularly concerned that Microsoft might block the distribution of Activision's popular Call of Duty franchise for certain platforms.

PlayStation maker Sony has expressed concern about Microsoft's Activision purchase. Sony fears that Microsoft could make Call of Duty exclusive to its Xbox consoles in the long run. To allay these concerns, Microsoft has offered Sony, Nintendo, Nvidia, and other companies 10-year agreements to continue bringing Call of Duty to their gaming platforms.

Cloud gaming is still in its early stages, and it requires a strong broadband connection to work well. According to network intelligence firm Sandvine, cloud gaming made up less than 1 per cent of global internet traffic in 2022. Microsoft still needs to persuade other regulators to approve the deal, as the EU is continuing to investigate the merger to assess whether it hurts competition, while the US Federal Trade Commission has sued to block the deal on antitrust grounds.