Global Courant 2023-04-26 18:29:24
LONDON — Britain’s top competition regulator moved to block on Wednesday Microsoft‘s acquisition of video game publisher Activision Blizzard.
The measure represents a major blow to the US tech giant as it tries to convince authorities that the deal will benefit competition. Microsoft said it plans to appeal the decision.
Shares of Activision Blizzard fell nearly 10% in US premarket trading. Microsoft shares rose nearly 8%, but this was largely tied to the company’s strong earnings report Tuesday.
The UK Competition and Markets Authority said it opposed the deal because it raised competition concerns in the burgeoning cloud gaming market. The CMA was previously concerned about the undermining of competition in games consoles, but ruled out those concerns in a preliminary decision in March.
Microsoft could make Activision’s games exclusive to its cloud gaming platform, Xbox Game Pass, halting distribution to other major players in the industry, the CMA said.
Cloud gaming is a technology that allows gamers to access games through remote corporate servers. Netflix. The technology is still in its infancy, but Microsoft is strongly committed to making it a mainstream way of gaming.
“Allowing Microsoft to take such a strong position in the cloud gaming market just as it is starting to grow rapidly would risk undermining the innovation that is critical to the development of these opportunities,” said the CMA Wednesday in a press release.
Microsoft offered the CMA remedies in an attempt to address his concerns – including “requirements governing which games should be offered by Microsoft to which platforms and under what conditions over a ten-year period”. However, the regulator rejected the proposals.
“Because the remedy applies only to a defined set of Activision games, which can only be streamed in a defined set of cloud gaming services, provided they are purchased from a defined set of online stores, there is significant risk of contention and conflict between Microsoft . and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market,” the CMA said.
‘Insufficient understanding of this market’
Microsoft Vice Chairman and President Brad Smith said in a statement that the company “remains fully committed to this acquisition and will appeal.”
“The CMA’s decision rejects a pragmatic path to addressing competition concerns and discourages technology innovation and investment in the UK,” Smith said on Wednesday.
“We have already signed contracts to make Activision Blizzard’s popular games available on an additional 150 million devices, and we remain committed to strengthening these agreements through regulatory action. We are particularly disappointed that, after much deliberation, this decision was a flawed seems to reflect an understanding of this market and the way the cloud technology in question actually works.”
Activision Blizzard CEO Bobby Kotick told employees in a letter on Wednesday that the company and Microsoft “have already begun appeals to the UK’s Competition Appeals Tribunal.”
“We are confident in our case because the facts are on our side: this deal is good for the competition,” he said.
“At a time when machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s strength in both areas, as well as our ability to get those technologies up and running immediately,” Kotick added. “Conversely, if the CMA’s decision stands, it would stifle investment, competition and job creation across the UK games industry.”
An Activision Blizzard spokesperson said the CMA’s decision was “a disservice to British citizens, who face an increasingly deteriorating economic outlook”.
“We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all the rhetoric – the UK is clearly closed for business,” the spokesperson said.
Microsoft announced its intention to acquire Activision Blizzard in January 2022 for $69 billion one of the biggest deals the video game industry has seen to date.
Executives at the Redmond, Washington-based tech giant believe the acquisition will boost its gaming endeavors by adding lucrative franchises like Call of Duty and Candy Crush Saga to its content offerings.
However, some of Microsoft’s competitors disputed the deal, fearing it would give Microsoft a firm grip on the $200 billion games market. Of particular note was the prospect that Microsoft may close distribution access to Activision’s popular Call of Duty franchise for certain platforms.
Sony, in particular, has expressed concern about Microsoft’s purchase of Activision. The Japanese gaming giant fears that Microsoft could eventually make Call of Duty exclusive to its Xbox consoles.
Microsoft tried to address those concerns by Sony, Nintendo, Nvidia and other companies 10-year agreements to continue bringing Call of Duty to their respective gaming platforms.
Microsoft claims it wouldn’t be financially beneficial to hold back Call of Duty from PlayStation, Nintendo, and other rivals given the licensing revenue it generates by keeping the game available on their platforms.
Microsoft’s Smith told CNBC last month that the company is offering Sony the same deal as Nintendo – to make Call of Duty available simultaneously on PlayStation and on Xbox, with the same features. Sony is still opposing the deal.
The CMA had raised concerns about the potential for Microsoft to hinder competition in the burgeoning cloud gaming market through its Xbox Game Pass subscription service, which offers cloud gaming as one of its benefits. Microsoft has committed to bringing new Call of Duty titles to Xbox Game Pass on day one of release.
Cloud gaming, or the ability to access games over the internet via PC or mobile devices, is still in its infancy and requires a strong broadband connection to work properly. Cloud gaming will account for only a fraction of global internet traffic by 2022.
Microsoft still needs to convince other regulators not to block the deal. The EU continues to investigate the merger to assess whether it harms competition, while the US Federal Trade Commission has filed a lawsuit to block the deal on antitrust grounds.
