Microsoft’s hopes of closing the deal on acquiring Activision Blizzard took a major hit after the U.K.’s Competition and Markets Authority (CMA) blocked the purchase on Wednesday. The reason might surprise gamers who prefer to be caught up in the console war, as it doesn’t actually have much to do with Sony. Instead, regulators stated Microsoft failed to effectively address the concerns in the cloud gaming sector. After launching an in-depth review of the deal in September 2022, the CMA provisionally found in February 2023 that the merger could make Microsoft even stronger in cloud gaming, possibly stifling competition in the growing market.
According to gov.uk, the U.K. cloud gaming market is forecast to be worth £11 billion globally and £1 billion in the U.K. by 2026. “The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft,” says the report. “The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.”
Unsurprisingly, both companies are appealing the decision and have no plans of giving up on the acquisition. But the decision from the CMA suggests Microsoft has an uphill battle ahead, as it readies for trial before the FTC’s in-house judge in August. The European Union’s decision is set to come on May 22.
While the gaming community and even most of the gaming media has focused largely on the Sony vs. Microsoft aspect of the acquisition, it’s clear that regulators are more concerned about the fact that Microsoft owns Xbox, Windows, and Azure. And this logic isn’t exactly foreign, considering Xbox’s own Phil Spencer admitted as much in an interview with Protocol in 2020: “When you talk about Nintendo and Sony, we have a ton of respect for them, but we see Amazon and Google as the main competitors going forward,” Spencer said. “That’s not to disrespect Nintendo and Sony, but the traditional gaming companies are somewhat out of position. I guess they could try to re-create Azure, but we’ve invested tens of billions of dollars in cloud over the years.”
If the CMA stands by its decision even after the appeals, there’s a very good chance this deal is as good as dead. Microsoft is unlikely to move forward if any of the large markets block the acquisition.
