Microsoft is currently the second largest company in the world according to current statistics published by Global Finance, but this hasn’t stopped its billion-dollar deal to buy the video game company Activision Blizzard from being blocked in the UK.
The UK government has issued a press release stating that Microsoft’s proposed $68.7 billion (£55 billion) takeover has been obstructed – a deal that would have seen the company acquire some of the hottest and most in-demand games such as Call of Duty, Overwatch, Candy Crush and World of Warcraft.
Alas, this deal has been blocked in the UK by the Competition and Markets Authority (CMA) resulting in significant frustration from both Microsoft and Activision who have both hit out saying they will appeal this verdict.
“We Will Work Aggressively With Microsoft To Reverse This”
A regulator from the CMA said that Microsoft’s purchase of Activision has been blocked because of concerns that the deal would have caused reduced innovation and less choice for gamers in the fast-growing cloud gaming business.
This has been met with outrage from both companies and a spokesperson from Activision has openly criticised the UK for limiting its own economic and innovative growth.
“The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses,”
“The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”
“We will work aggressively with Microsoft to reverse this on appeal” the spokesperson added.
Brad Smith – vice chairman and president of Microsoft – said that they were also committed to appealing the CMA’s ban on the acquisition from their side, particularly since the company has already signed contracts to make Activision’s games available on 150 million devices
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,”
“We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
Sticking By Their Decision
For Microsoft’s deal to go through, it must first be approved by the CMA and then also by regulatory bodies in the US and European Union.
As the CMA is the first regulator to rule and it has decided to block the deal, this decision could make or break the entire acquisition. And, unfortunately for Microsoft and Activision who have both hit back at the CMA’s choice, the regulators are sticking to their guns.
Martin Coleman – chair of the independent panel that investigated the proposal – said that it was vital to “protect competition in the emerging and exciting market” of cloud gaming.
“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,”
“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,” he added.
In regard to Microsoft’s attempts to appeal the decision, Coleman stated that while Microsoft had submitted plans to address the CMA’s concerns, they were not effective and “would have replaced competition with ineffective regulation”.
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Looking Ahead In The Gaming Market
Microsoft’s wish to acquire Activision Blizzard represents the two ways in which the gaming market could go in the future.
Speaking before the CMA ruling, games editor for the Guardian Keza MacDonald explained this: “The established financial model for a games console is that you buy one, then you buy games to play on it.
“But what is happening now is that cloud computing and other technologies are creating the opportunity for a kind of Netflix of games – where you stream titles rather than owning them.”
Microsoft is a firm supporter of the latter in terms of what the future of gaming should look like. The company has been trying to strengthen its position in the market by attempting to brand itself as the Netflix of gaming.
The UK cloud gaming market is growing fast. Monthly active users in the UK tripled from the start of 2021 to the end of 2022 and it is predicted to be worth up to £11 billion globally. So, it is unsurprising that Microsoft is attempting to seize the opportunity to buy up gaming companies that operate in the UK so that users may stream all of their games directly through them.
This is an idea that Microsoft is already heavily invested in, already accounting for an estimated 60-70% of global cloud gaming services as well as owning Xbox.
MacDonald stated that Microsoft plans to take over the gaming market through their Gamepass service: “They have their Gamepass service, where you pay a subscription and can access a whole host of titles. Eventually, Microsoft hopes you’ll be able to play all those games on your phone, your console or your TV.
“Microsoft is making a play for the future of video games, not just the current console market. That’s a really important part of this deal.”
Having already become a technology giant in the hardware world, Microsoft is desperately attempting to impose itself into the gaming market in order to one-up its competitors such as Sony and Nintendo which it has struggled to contend with in the past.
“Sony has always been way ahead on quality games and Microsoft has never really had the games to compete on that level,” MacDonald added. “This is a way to buy and control the futures of a lot of very popular games.”
But despite Microsoft’s latest efforts to persuade the CMA to green-light its purchase of Activision, the CMA is clearly not convinced that this wouldn’t have a negative impact on the future of cloud gaming.
Whilst this has induced a sense of surprise among the UK games industry as there was a general expectation the acquisition would be approved, Microsoft’s competitors such as Sony will no doubt be pleased that the deal has been turned down as this will prevent its Playstation from being blocked from some of the world’s most popular titles.
Unfortunately for Microsoft, without agreement from the CMA, the tech giant’s journey to becoming the top cloud gaming giant may simply grind to a halt.