The news: The UK’s Competition and Markets Authority (CMA) is blocking Microsoft’s blockbuster $68.7 billion acquisition of gaming giant Activision Blizzard.
- The deal is being blocked on the grounds that creating a gaming monolith would smother competition in cloud gaming. Activision Blizzard owns games such as Call of Duty, Candy Crush, World of Warcraft, Overwatch, and Diablo.
- Activision Blizzard’s stock tumbled 10% Wednesday as a result of the news.
- The CMA said Microsoft’s proposed remedies to address its concerns were inadequate and ineffective.
- "This decision appears to reflect a flawed understanding of the market and the way the relevant cloud technology actually works,” Microsoft president Brad Smith said.
Zooming in: 40% of 300 game developers surveyed said cloud gaming will grow the most of any gaming platform by 2025, according to Perforce Software. Twenty-four percent said mobile will grow the most.
- Microsoft is a dominant player in this market with its Xbox Cloud Gaming service, which has a global market share of 60% to 70%, according to the CMA.
- "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," said Martin Coleman, who investigated the merger for the regulator.
What’s next: Microsoft and Activision Blizzard said they would appeal to the UK Competition Appeals Tribunal. They argued that the CMA misunderstood the market and the technology involved in cloud gaming.
Our take: Microsoft’s challenge of the decision might not succeed against the antitrust watchdog, and other regulators could follow suit.
The latter will be particularly challenging since the FTC under chair Lina Khan seems to have made Microsoft and this particular acquisition a primary target for its first big antitrust win
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