Microsoft’s bid to acquire Activision Blizzard for a massive sum of $68.7 billion has been a hot topic throughout the gaming industry. Recently, the UK’s Competition and Markets Authority (CMA) blocked the deal citing concerns that Microsoft could dominate and control the cloud gaming market, while the EU and China approved it. This has left many wondering whether the deal is good or bad for the industry, whether the CMA’s decision is right, and what will happen next. We asked the experts for their opinions.
Unequal Application of Government and Regulatory Action
The CMA’s decision to block the merger is bad for the industry for multiple reasons. Firstly, it creates an appearance of special treatment of Sony, which has been the king of platform exclusives and acquiring companies. Anytime companies receive special treatment or benefit disproportionately against competitors based on regional influence, it is bad for the industry.
Microsoft Dominating Cloud Gaming
The CMA’s argument that Microsoft is already dominating cloud gaming is nonsensical, and it is related to Sony’s fears of losing out as this platform continues to grow. The cloud gaming market is too nascent to claim that Microsoft has any sort of monopoly, and things are changing rapidly.
EUs Approval of the Deal
The EU’s approval of the deal is a positive step forward for Microsoft and provides ammunition to use in the UK CMA’s appeal. However, there is still a long way to go, and reviews of this deal in the US aren’t getting underway until later this year. Therefore, we are still a long way from the final chapter of this story.
Increased Scrutiny on Big Tech Firms
Many expected the CMA to approve the merger. It had dropped its concerns about whether Call of Duty would remain platform agnostic. However, increased scrutiny on Big Tech firms exemplified by the CMA’s surprising decision to block the merger has changed the course of things. If regulators are willing to stop Microsoft’s biggest move, it indicates that they are willing to take a more aggressive stance against any M&A that they believe will stifle competition.
The Future of the Deal
Whether or not Microsoft wins the appeal or finds a workaround in the UK or if the FTC approves the deal in the US, the subtext to Big Tech is that M&A as a means of expanding into new markets is no longer a straightforward path to growth. If the deal goes through, it is likely to impact the industry beyond consumers. A consolidation of two companies is often followed by fewer developers, new entrants, ideas, job opportunities and fewer choices all around.
CMA’s concern is justified.
Microsoft has always been very open compared to some companies like Apple, working extensively on interoperability, but it has also shown strategies to dominate markets. Hence the CMA’s fear of it is justified. The CMA’s decision shows its willingness to ensure equal access to content on all platforms, which is the promise of cloud gaming and the benefit the end-user can get from an open market. The EU’s decision showed similar concern for cloud gaming but was more optimistic about addressing the issue.
The CMA stands by its position that a free ten-year licence for any Activision game on any cloud gaming platform or device does not fully address their anti-competition concerns.Meanwhile, Microsoft and Activision have said they’ll appeal the veto. According to historical precedent, it seems unlikely the CMA will overturn its decision. Therefore, it just might be the end of the road for the Microsoft and Activision merger. However, this is unlikely to have any significant impact on their ability to continue doing business as separate entities.