Microsoft Activision Blizzard Merger Blocked by UK Market Regulator Citing "Cloud Gaming Concerns"

[btarunr]

The United Kingdom Competition and Markets Authority (UK-CMA) on Wednesday blocked the proposed $68.7 billion merger of Microsoft and Activision-Blizzard. In its press-releasing announcing its final decision into an investigation on the question of how the merger will affect consumer-choice and innovation in the market, the CMA says that the merger would alter the future of cloud gaming, and lead to "reduced innovation and less choice for United Kingdom gamers over the years to come." Cloud gaming in this context would be games rendered on the cloud, and consumed on the edge by gamers. NVIDIA's GeForce NOW is one such service.

Microsoft Azure is one of the big-three cloud computing providers (besides AWS and Google Cloud), and the CMA fears that Microsoft's acquisition of Activision-Blizzard IP (besides its control over the Xbox and Windows PC ecosystems), would "strengthen that advantage giving it the ability to undermine new and innovative competitors." The CMA report continues: "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." Microsoft and Activision-Blizzard are unsurprisingly unhappy with the verdict.



The UK-CMA thanked Microsoft and Activision-Blizzard to put forth their case and helping put the regulator's concerns to ease. ""Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market," it writes.

In a brief and blunt statement, Microsoft responded:

We remain fully committed to this acquisition and will appeal. The CMA's decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. We have already signed contracts to make Activision Blizzard's popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We're especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.

Meanwhile, Activision-Blizzard CEO Bobby Kotick in a company-wide e-mail, writes:

Team,

Today, the Competition and Markets Authority (CMA), a regulatory agency in the U.K., decided not to approve our merger with Microsoft. This isn't the news we wanted—but it is far from the final word on this deal.

Alongside Microsoft, we can and will contest this decision, and we've already begun the work to appeal to the U.K. Competition Appeals Tribunal. We're confident in our case because the facts are on our side: this deal is good for competition.

The U.K. hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that. At a time when the fields of machine learning and artificial intelligence are thriving, we know the U.K. market would benefit from Microsoft's bench strength in both domains, as well as our ability to put those technologies to use immediately. By contrast, if the CMA's decision holds, it would stifle investment, competition, and job creation throughout the U.K. gaming industry.

This merger is a complex process, and I know I'm not the only one frustrated by the hurdles and delays. We're accustomed to a company culture that moves quickly to accomplish big goals, so it's tough when we can't close things out at our usual energetic pace. We'll keep pressing our case, because we know that this merger will benefit our employees, the broader U.K. tech workforce, and players around the world.

I'm going to do everything I personally can to advocate for us and help regulators understand the competitive dynamics in our industry. What gives me confidence is that, whether on our own or united with another company, we are one of the strongest companies in our industry, poised for continued growth, and building on our incredible IP.

I appreciate your continued hard work and focus, and for continuing to connect and engage our players around the world. This is the best time to be in our field, and you all represent the best of our industry. We'll be sure to keep you updated on next steps as they happen.

With appreciation,
Bobby

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[wNotyarD]

CMA had many reasons they could invent to block the acquisition, but cloud gaming? Really?

 

[Imouto]

Rejoice for some common sense among regulators. Why would they let these megacorporations to become even bigger is the mystery here.

 

[Denver]

It looks like a circus, we're talking about games... there shouldn't even be this kind of discussion and bureaucracy. It's not essential technology or weaponry.

Sony and any other competitors can make new games.

 

[Daven]

It looks like a circus, we're talking about games... there shouldn't even be this kind of discussion and bureaucracy. It's not essential technology or weaponry.

Sony and any other competitors can make new games.

Anti-competitive regulation is market agnostic. You add even worse chaos if you pick and choose what is essential and therefore regulated.

Don’t give bureaucrats another layer of decision making and playing favorites.

 

[Imouto]

Sony and any other competitors can make new games.

So can Microsoft and yet they decided to buy a major player instead of creating their own with all their billions.

Oh, wait. It's because they are the ones who can't do anything else but buy everything instead of competing.

 

[Frick]

Well crap, now there's no saving Blizzard.

 

[Denver]

So can Microsoft and yet they decided to buy a major player instead of creating their own with all their billions.

Oh, wait. It's because they are the ones who can't do anything else but buy everything instead of competing.

In fact, they can do both at the same time. But buying a franchise/studio is faster than creating it, again, it's just games, there shouldn't be these bureaucracies, if the company owners want to sell, regulators shouldn't get involved in such an issue.

It does not affect politics, economics, security or any essential work aspect... I think regulators shouldn't get involved in this.

 

[Imouto]

In fact, they can do both at the same time. But buying a franchise/studio is faster than creating it, again, it's just games, there shouldn't be these bureaucracies, if the company owners want to sell, regulators shouldn't get involved in such an issue.

It does not affect politics, economics, security or any essential work aspect... I think regulators shouldn't get involved in this.

There are jobs on the line. Just because someone has all the money in the world doesn't allow them to put anyone out of business whatever that is.

 

[qlum]

CMA had many reasons they could invent to block the acquisition, but cloud gaming? Really?

It is a market that can potentially grow, and as it stands Microsoft is dominant in that market.
Let's be real Microsoft did not buy Activision out of kindness, rather they want to recoup that investment one way or the other.
Trying to turn game pass as a dominant monopoly is one reason.

 

[Vayra86]

In fact, they can do both at the same time. But buying a franchise/studio is faster than creating it, again, it's just games, there shouldn't be these bureaucracies, if the company owners want to sell, regulators shouldn't get involved in such an issue.

It does not affect politics, economics, security or any essential work aspect... I think regulators shouldn't get involved in this.

Its about keeping some semblance of a level playing field in markets. Pretty important.

What they actually say in their response (MS/Acti) above here is that they need to be near monopolists to make cloud gaming work. I think that is pretty telling and frankly I think its even true - many cloud services in the game are either going to fragment content making them unpopular, or they're all going to offer the same thing which makes it a choice out of nothing. And what's funny... In the same note Bobby says he can survive just fine without it. So how does that mix exactly, pray tell

May many more regulators follow up on this. This is a nail in the coffin of cloud gaming indeed and I love it. We don't want this, even if you think you do. Everything connected to one company is just a recipe for disaster, its common sense, so the end result is cloud gaming can't survive - but first we'll see on demand video happen. Subscription prices are rising across the board and the number of services is growing, it won't last. The real end game is unified platform, much like how Steam got big. Everything else is desperately trying to find a USP, but none appeal enough to make them grow in tune. AFAIK apart from Netflix most of the on demand services aren't structurally profitable either. In Music, Spotfiy still fails to turn a profit.

 

[Eternit]

It is a market that can potentially grow, and as it stands Microsoft is dominant in that market.
Let's be real Microsoft did not buy Activision out of kindness, rather they want to recoup that investment one way or the other.
Trying to turn game pass as a dominant monopoly is one reason.

Exactly. While Activision's practices are bad and I don't think they will develop any new great game, Microsoft is not a savior here. Surly they might help to develop a few good games from Blizzard's IPs, but in the long term they want to monopolize the market of subscription based gaming and their goal will be to destroy the non subscription gaming.

 

[Punkenjoy]

I mean both companies are US companies, so could they just say fuck it UK, and get out of that market for gaming product and just do the whole merger?

I mean if Microsoft said we are getting out of UK, i bet UK would be way more worried than Microsoft. It would be a bit bully tho.

 

[zlobby]

Whoopsie! Someone got their bonus prematurely.

 

[Daven]

In fact, they can do both at the same time. But buying a franchise/studio is faster than creating it, again, it's just games, there shouldn't be these bureaucracies, if the company owners want to sell, regulators shouldn't get involved in such an issue.

It does not affect politics, economics, security or any essential work aspect... I think regulators shouldn't get involved in this.

Again do not give regulators and corporations another level to pull. Just imagine all the lawsuits and business applications filled removing X company or adding Y company to your ill defined list. It will be chaos. A list that completely absolves an entity from anticompetitive scrutiny. Every company will want to be on it and pay large sums to lawyers and lobbying politicians to get there.

Your idea does the opposite of what you want and creates more bureaucracy. Think about it.

 

[Imouto]

I mean both companies are US companies, so could they just say fuck it UK, and get out of that market for gaming product and just do the whole merger?

I mean if Microsoft said we are getting out of UK, i bet UK would be way more worried than Microsoft. It would be a bit bully tho.

Yeah. I bet the UK would be terrified if Microsoft forced them to look out for alternatives and showed the world how easy it is to replace them and how easy it would be to push for open standards.

And I also bet other countries/organizations would be absolutely thrilled about how a corporation doesn't respect a regulator.

This site...

 

[Punkenjoy]

Yeah. I bet the UK would be terrified if Microsoft forced them to look out for alternatives and showed the world how easy it is to replace them and how easy it would be to push for open standards.

And I also bet other countries/organizations would be absolutely thrilled about how a corporation doesn't respect a regulator.

This site...

We all know that open source is magic and everything work out of the box and you don't even need to migrate anything because things just work and all alternative do exactly what you need.


People are so clueless about how hard it is really to get out of the microsoft ecosystem. Indeed, in your little house labs or little business yeah why not.

There is a right time to go to open source and it's at the conception. For large organisation, if you didn't do it there, you are speaking about multi years and costly project just for the sake of changing.

 

[Imouto]

We all know that open source is magic and everything work out of the box and you don't even need to migrate anything because things just work and all alternative do exactly what you need.


People are so clueless about how hard it is really to get out of the microsoft ecosystem. Indeed, in your little house labs or little business yeah why not.

There is a right time to go to open source and it's at the conception. For large organisation, if you didn't do it there, you are speaking about multi years and costly project just for the sake of changing.

It's you who presented the scenario and I went along with it. I don't think you understand that by pulling out of the UK you leave it open for a competitor or, even worse business wise, open source they would be replaced one way or another no matter how painful and by the end of the day it would be Microsoft's loss.

When Google wanted to make a mobile OS they based it on Linux and it was a success. Kicked Nokia out of the market and all.
When Valve wanted to make a PC handheld they based it on Linux and it was a success.
There are open source projects that are untouchable in terms of competition. For example nobody can even dream of making a proprietary alternative to OBS. Once a portion of the software ecosystem goes open source there is no going back.

 

[Blitzkuchen]

Why not, Microsoft is the same garbage in green.

I dont want to buy 99,99% of the Micrsoft Games even need for speed unbound is funier than the all hail great day forza 5.
Microsoft and Activision will be great, only garbage and overhype games.

 

[trsttte]

many cloud services in the game are either going to fragment content making them unpopular, or they're all going to offer the same thing which makes it a choice out of nothing

I think the issue is everyone wants to turn cloud gaming into a simple cash cow "you own nothing" type of deal which is just ridiculous. No one needs that. Cloud gaming, as it's being explored, doesn't need to exist, if I buy a game I should be able to play it regardless if my computer is in the living room or in a server in a different country. This is only a problem because game publishers want to milk any dollar they can and everyone wants to get on the sweet fixed recurrent revenue action, this shouldn't be a new "market segment" like they're trying to make it.

I can do this on a regular server no problem, Nvidia tried to offer a legitimate product and everyone got up in their business asking for a pay day, it's absurd.

Now real cloud gaming, where cloud power is leveraged to make bigger and massive game worlds would be super cool and something worth exploring, but no one is going after that, they just want the easy money.

Yeah. I bet the UK would be terrified if Microsoft forced them to look out for alternatives and showed the world how easy it is to replace them and how easy it would be to push for open standards.

And I also bet other countries/organizations would be absolutely thrilled about how a corporation doesn't respect a regulator.

This site...

You're not wrong, but the UK would be fucked if Microsoft decided to pull out. They are a diying market powerhouse, leaving the EU was a huge mistake.

 

[Ayhamb99]

I'll admit to some bias because i grew up playing on the original Xbox and Xbox 360 when i was a kid so naturally I want to support Xbox and Microsoft in this ordeal, but they really need to figure out different ways to stay competitive in the console business instead of just buying up big developers. Like if they invested the huge sum of money that they're spending for this deal instead to the rest of the game studios that they own and manage them more efficiently, they could have developed a bigger library of exclusives which would have brought more people to Xbox similar to how Sony Playstation is doing with their library of exclusives.

Although the UK gov using Cloud gaming as their reason for blocking the deal was the weirdest reason to choose though.

You're not wrong, but the UK would be fucked if Microsoft decided to pull out. They are a diying market powerhouse, leaving the EU was a huge mistake.

I doubt that Microsoft would completely pull out of the UK, In 2021 when revenue figures came out from Activision Blizzard, they had a total global turnover of £6.4 Billion with £700 Million of that coming over from the UK alone. No way that they would be willing to lose that amount