UK CMA rejects Microsoft's deal to buy Activision Blizzard over cloud gaming concerns

The UK Competition and Markets Authority has rejected the $69 billion deal for Microsoft to buy Activision Blizzard. The UK CMA stated the deal would "would damage competition in the Cloud Gaming market."

In its press release, the CMA stated that Microsoft currently controls between 60 to 70 percent of the cloud gaming market. In addition to owning the Xbox business, the CMA points out that Microsoft also has the leading PC operating system in Windows, along with its Azure and Xbox Cloud Gaming infrastructure.

It added:

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.

The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.

While the CMA did state that Microsoft offered remedies for this situation, the CMA rules that they did not address some areas:

• It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
• It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
• It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

The press release also quotes Martin Coleman, who was the chair of the independent panel of experts that the CMA brought in to investigate the merger. He stated:

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.

This decision is a massive blow to Microsoft, and it remains to be seen what the company will do after this rejection by the UK CMA.