UK: Microsoft's $75B Activision Blizzard Purchase Rejected

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Facts

  • On Wednesday, the UK's Competition and Markets Authority (CMA) rejected Microsoft's $75B deal to buy video game maker Activision Blizzard Inc., arguing that the proposed acquisition poses a threat to competition in the UK’s gaming industry.1
  • The CMA estimates that Microsoft controls around 60-70% of global cloud gaming services and, if it acquired Activision's Call of Duty, Overwatch, and World of Warcraft, it would give the company a significant advantage in the market.2
  • The regulator added that Microsoft could make Activision games exclusive to its cloud gaming platform Xbox Game Pass, which would cut off distribution to other industry stakeholders.3
  • Microsoft said the "decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works," with Activision adding that it "contradicts the ambitions of the UK to become an attractive country to build technology businesses."4
  • Because Microsoft contends it wouldn’t be financially beneficial to withhold Call of Duty from the likes of Sony's PlayStation, Nintendo, Nvidia, and others, it has offered those rivals 10-year agreements to continue bringing Call of Duty to their respective gaming platforms.3
  • Microsoft has said it would appeal the decision. Though countries such as Brazil, Saudi Arabia, and South Africa have already approved the deal, global deals like this typically need the endorsement of large national regulators to move ahead.1

Sources: 1Wall Street Journal, 2Verge, 3CNBC, and 4Eurogamer.

Narratives

  • Narrative A, as provided by Forbes. This decision doesn't make sense given that cloud gaming makes up a small proportion of the entire video game industry. If the CMA was making an anti-trust argument to protect the UK from video game monopolies, wouldn't it base its decision on the consoles people use to play video games like Xbox and PlayStation?
  • Narrative B, as provided by Gov.Uk. The video game industry is a dynamic and creative one, and monopolizing an entire industry would diminish that creativity from other game providers. Microsoft didn't offer PC providers other than Windows access to the games, nor did it suggest allowing games other than those in its terms of service to be on its service, which goes directly against market competition. Well-calculated regulation made total sense here.