Multiple outlets are reporting this morning that Microsoft’s buyout of Activision-Blizzard has been blocked in the UK. The Competition and Markets Authority aka CMA determined that the merger of the two megacorps – to the tune of almost $70B US – would impede industry competition in the country, saying the move could “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.”
The companies have spent the last several months addressing concerns from regulators and rival companies, but the CMA wasn’t mollified on the specific topic of cloud gaming, a position foreshadowed last month.
“Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors. Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market. Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
The timing could hardly be worse for Activision-Blizzard, whose Q1 2023 financials are expected to land tomorrow afternoon. ATVI’s stock slumped as much as 10% on the news before market open today. Activision-Blizzard’s Bobby Kotick said in his own statement to staff that it “isn’t the news [the company] wanted – but it is far from the final word on this deal.”
“Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition. The UK hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that. At a time when the fields of machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately. By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry. This merger is a complex process, and I know I’m not the only one frustrated by the hurdles and delays. We’re accustomed to a company culture that moves quickly to accomplish big goals, so it’s tough when we can’t close things out at our usual energetic pace. We’ll keep pressing our case, because we know that this merger will benefit our employees, the broader UK tech workforce, and players around the world.”
Microsoft’s Brad Smith also weighed in, saying that Microsoft will appeal the decision, taking aim at what he characterizes as the CMA’s “flawed understanding” of the games market and cloud tech.
— Brad Smith (@BradSmi) April 26, 2023