The U.K.’s Competition and Markets Authority (CMA) has given its approval for Microsoft’s proposed $69 billion takeover of gaming firm Activision Blizzard, signaling the removal of the last major obstacle for the deal to proceed. Microsoft initially proposed the acquisition in January 2022 but has faced regulatory challenges in the U.S., Europe, and the U.K. over concerns about reduced competition in the gaming market, particularly in the nascent cloud gaming sector.
The CMA’s decision represents a significant reversal in its stance towards the deal. The regulator had previously blocked the acquisition earlier this year due to concerns that it could impede competition in the emerging cloud gaming market. However, Microsoft offered a series of concessions to address these concerns, such as divesting the cloud rights of Activision games to French game publisher Ubisoft Entertainment. The CMA has now approved the deal without cloud gaming rights, stating that it will prevent Microsoft from monopolizing the cloud gaming market and safeguard competitive prices and services for U.K. cloud gaming customers.
Cloud gaming is regarded as the future of the gaming industry, with subscription services allowing users to stream games like they would movies or shows on platforms like Netflix. This model could eliminate the need for expensive consoles, with players accessing games on PCs, mobile devices, and TVs instead. Regulators were worried that the Microsoft-Activision merger could stifle competition in this burgeoning sector. The CMA argued that allowing the deal to proceed would give Microsoft a dominant position in the cloud gaming market.
The European Union was the first major regulator to clear the deal in May after Microsoft made concessions. The U.S. Federal Trade Commission (FTC) initially contested the acquisition but failed to halt it in July when a judge ruled against the FTC’s attempt. The CMA, however, maintained its opposition to the deal at the time, citing concerns that the compromises made to the EU would enable Microsoft to dictate the terms and conditions of the cloud gaming market for the next decade.
In August, Microsoft offered further concessions to the CMA, resulting in a restructured transaction that included divesting cloud rights for existing and future Activision games to Ubisoft Entertainment. These measures were aimed at assuaging the CMA’s concerns and ensuring that Microsoft does not exert excessive control over the cloud gaming arena. While the U.K. has now given its approval, the CMA criticized Microsoft’s negotiation tactics, stating that the tech giant had the opportunity to restructure the deal earlier but chose not to. The CMA’s CEO, Sarah Cardell, emphasized that such tactics were inappropriate and a waste of time and money.
The CMA’s approval is significant for Microsoft, as it removes the final regulatory hurdle for the Activision takeover. Microsoft President Brad Smith expressed gratitude for the CMA’s decision, emphasizing that the acquisition would benefit players and the gaming industry worldwide. Activision Blizzard CEO Bobby Kotick also conveyed excitement about the possibilities that the deal would bring for employees and players. Throughout the regulatory scrutiny, Microsoft has strived to demonstrate that it will not make games exclusive, forging partnerships with other companies to ensure broader access to its games.
Overall, the CMA’s approval paves the way for Microsoft to complete its acquisition of Activision Blizzard, facilitating the consolidation of these two major players in the gaming industry. The deal is expected to have far-reaching implications for the gaming market, particularly in the realm of cloud gaming, which holds transformative potential in the future of the industry.