In an unexpected blow to Microsoft, Britain's antitrust regulator has moved to block the tech giant's $68.7B purchase of Activision Blizzard, saying the deal would harm the burgeoning cloud gaming market.
Microsoft says it will appeal the decision, which delivers a significant setback to the largest-ever deal in gaming.
The U.K. Competition and Markets Authority (CMA) estimates that the deal would give Microsoft a 60-70% cloud gaming market share, weakening competition and giving it the incentive to exclude games from rivals.
- The CMA determined that, if the deal went through, Microsoft would consider it commercially advantageous to make Activision Blizzard games, such as "Call of Duty" and "Overwatch," exclusive to its own cloud gaming service.
- After analyzing more than 3 million documents and 2,000 emails from the public, the CMA concluded that the takeover would lead to less innovation and ultimately fewer choices for gamers.
In an effort to alleviate the CMA's concerns, Microsoft brokered deals with rival services, including one to bring Xbox PC games to Nvidia’s cloud gaming service.
- Another 10-year contract with Nintendo would ensure that "Call of Duty" games are released to Nintendo players on the same day they're launched on Xbox, with the same content.
- However, in examining these deals, the CMA claimed that they had "significant shortcomings” and are “too limited in scope."
- For example, the agency said the deals lacked the ability for competitors "to offer versions of games on PC operating systems other than Windows."
In response to the news, Microsoft president Brad Smith said it remains "fully committed to this acquisition and will appeal."
- He said the CMA's decision "discourages technology innovation and investment" in the U.K. and "appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
- Activision stood by Microsoft's efforts to appeal, with CEO Bobby Kotick saying it is confident that the deal "benefits competition, consumers, and job creation in markets around the world, especially in the U.K."
