Britain blocks Microsoft’s acquisition of Activision Blizzard

A Call of Duty: Modern Warfare video game from Activision Blizzard is inserted into Microsoft’s Xbox One video game console installed in Denver, Colorado, Wednesday, January 19, 2022.

Michel Ciaglo | Bloomberg | Getty Images

LONDON – Britain’s main competition regulator decided on Wednesday to block Microsoftthe acquisition of a video game publisher by ActivisionBlizzard.

The move marks a blow for the US tech giant as it seeks to convince authorities that the deal will benefit competition.

Microsoft has announced its intention to appeal the decision.

Shares of ActivisionBlizzard fell 10% pre-release in the United States.

The UK Competition and Markets Authority said it opposed the deal because it raised competition concerns in the nascent cloud gaming market.

Microsoft could make Activision’s games exclusive to its cloud gaming platform, Xbox Game Pass, cutting distribution to other key players in the space, the CMA said.

Cloud gaming is a technology that allows gamers to access games through companies’ remote servers – effectively streaming a game like you would a movie on Netflix. The technology is still in its infancy, but Microsoft is betting big on it becoming a mainstream way to play games.

“Allowing Microsoft to take such a strong position in the cloud gaming market even as it begins to grow rapidly would risk undermining the innovation that is critical to the development of these opportunities,” the CMA said in a statement on Wednesday. Press release.

Microsoft offered the CMA solutions to try to resolve its concerns – including “requirements governing which games must be offered by Microsoft on which platforms and under what conditions over a ten-year period” – but the regulator rejected proposals.

“Since the remedy only applies to a defined set of Activision games, which can only be streamed 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, especially over a ten-year period in a rapidly changing market,” the CMA said.

Microsoft Vice President and President Brad Smith said in a statement that he remains “fully committed to this acquisition and will appeal.”

“The CMA’s ruling rejects a pragmatic route to addressing competition concerns and discourages technological innovation and investment in the UK,” Smith said on Wednesday.

“We have already signed contracts to make popular games from Activision Blizzard available on an additional 150 million devices, and we remain committed to bolstering these agreements through regulatory action. We are particularly disappointed that after extensive deliberation, this decision appears to reflect an erroneous understanding of this market and how the corresponding cloud technology actually works.”

Bobby Kotick, CEO of Activision Blizzard, told employees in a letter on Wednesday that two companies had “already started work to appeal to the UK’s Competition Appeal Tribunal.”

“We are confident in our case because the facts are on our side: this agreement is good for competition,” he said.

“At a time when the areas of machine learning and artificial intelligence are booming, we know the UK market would benefit from Microsoft’s benchmark strength in both areas, as well as our ability to bring these technologies to immediate benefit,” added Kotick. “In contrast, if the CMA’s decision is upheld, it would stifle investment, competition and job creation across the UK gambling industry.”

Microsoft announced plans to acquire Activision Blizzard in January 2022 for $69 billion, one of the biggest deals in the video game industry nowadays.

Executives at the Redmond, Wash.-based tech giant believe the acquisition will bolster its gaming efforts by adding lucrative franchises such as Call of Duty and Candy Crush Saga to its content offerings. .

However, some of Microsoft’s competitors have taken issue with the deal, fearing it will give Microsoft a tight grip on the $200 billion gaming market. The perspective that Microsoft could close access to distribution of Activision’s popular Call of Duty franchise for some platforms.

sony, in particular, expressed concern over Microsoft’s purchase of Activision. The Japanese gaming giant is concerned that Microsoft will make Call of Duty exclusive to its Xbox consoles for the long term.

Microsoft sought to allay these concerns by offering Sony, nintendo, Nvidia and other companies 10 year agreements to continue bringing Call of Duty to their respective gaming platforms.

Microsoft says it would not be financially beneficial to withhold Call of Duty from PlayStation, Nintendo and other rivals given the licensing revenue it generates by keeping the game available on their platforms.

Microsoft President Brad Smith told CNBC last month that the company was offering Sony the same deal as Nintendo – to make Call of Duty available on PlayStation at the same time as Xbox, with the same features. Sony still opposes the deal.

The CMA had raised concerns that Microsoft could stifle competition in the nascent cloud gaming market through its Xbox Game Pass subscription service, which offers cloud gaming among its benefits. Microsoft is committed to bringing new Call of Duty titles to Xbox Game Pass on day one of release.

Cloud gaming, or the ability to access games via PC or mobile devices over the Internet, is still in its infancy and requires a strong broadband connection to function well. Cloud gaming only accounted for a fraction of global internet traffic in 2022.

Microsoft will still have to convince other regulators not to block the deal. EU keep probing the fusion to assess whether it harms competition, while the U.S. Federal Trade Commission sued to block deal for antitrust reasons.

This is breaking news and will be updated shortly.

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