The UK's Competition and Markets Authority (CMA) finally published its verdict on the Activision Blizzard takeover and, in the end, turned its back on Microsoft. The body decided to block the major acquisition, so the deal is on the backburner.
Initially, the CMA opposed the deal, but in recent days it had changed its stance and sided with Microsoft. So analysts, gamers and the general public were waiting for approval of the purchase. The CMA's decision is undoubtedly a blow to Microsoft, as its approval was expected to cause a domino effect on the rest of the regulators.
Why did the CMA block the purchase of Activision Blizzard?
Everything seemed to indicate that the CMA was going to approve the deal, as Microsoft had already addressed the regulator's concerns regarding the console market and Call of Duty. Thanks to a statement, we know that the agency decided to block the purchase because of what it implies for the cloud gaming sector.
Microsoft had already presented potential remedies to resolve this situation, but they were not enough. The CMA believes that the deal will impact the future of cloud gaming and will reduce innovation and the number of options for UK gamers.
“The CMA has prevented Microsoft’s proposed purchase of Activision over concerns 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. 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." said the agency.
The CMA notes that Microsoft has approximately 60-70% of the global cloud gaming market through its infrastructure and services such as Azure and Xbox Cloud Gaming. In addition, it indicated that it owns Xbox and is a leader in the PC market.
"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." said theinstitution.
Microsoft's alternatives on cloud gaming were not enough
In its response, the CMA points out that Microsoft's proposals and concessions regarding cloud gaming were not sufficient. This despite agreeing 10-year deals with services such as GeForce Now, Boosteroid and Ubitus.
The reason? The agency spoke of several shortcomings, such as not covering the different business models of the technology, not being open enough for vendors to offer their games on non-Windows operating systems and for trying to standardize the terms and conditions of the games already available.
"Accepting Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA. By contrast, preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention".