Yahoo Finance Microsoft deal to buy Call of Duty-maker Activision faces being blocked in UK
Microsoft's acquisition of computer game maker Activision has hit another stumbling block after a UK regulator said the deal, "could result in higher prices, fewer choices and less innovation for UK gamers".
The Competition and Markets Authority (CMA), the UK's market competition regulator, has warned that if the deal to purchase Activision succeeds it could give Microsoft's Xbox exclusive access to 'AAA' gaming title Call of Duty, which would present a significant advantage over rivals like Sony's Playstation.
In a statement released on Wednesday, the CMA said: "The deal would reduce the competition between Microsoft (MSFT) and Sony (SONY), and could result in all gamers seeing higher prices, reduced range, lower quality, and worse service in gaming consoles over time."
Microsoft was expected to complete its $68.7bn purchase of Activision Blizzard (ACTVI) by June 30, 2022.
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However, the deal is now being held up by competition regulators in the UK, the EU and the US, with the CMA arguing against the merger, stating that it could make Microsoft even stronger in cloud gaming, "which would stifle competition in this growing market and harm UK gamers who cannot afford expensive consoles".
In Wednesday's statement the CMA added: "The deal could also harm UK gamers by weakening the important rivalry between Xbox and PlayStation gaming consoles."
The CMA said it had concluded that if the deal were to progress, Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.
This would allow Microsoft to increase prices because of the reduction in competition that the company would otherwise face in the cloud and console gaming market in the UK.
The CMA pointed out that Microsoft already accounts for an estimated 60-70% of global cloud gaming services and also owns the Xbox console, and the leading PC operating system, Windows.
"This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC", the UK's market competition regulator concluded.
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The acquisition would give Microsoft ownership of Call of Duty (CoD), Activision’s flagship game, which plays an important role in driving competition between consoles.
If one console has the exclusive rights over Call of Duty, it would give that console a distinct advantage in the market.
Microsoft has not suggested it would limit Call of Duty to the Xbox alone, but the CMA pointed out that buying gaming studios and making their content exclusive to Microsoft’s platforms, has been used by Microsoft following several previous acquisitions.
Martin Coleman, chair of the CMA's independent panel of experts conducting this Phase 2 investigation, said: “It’s been estimated that there are around 45 million gamers in the UK, and people in the UK spend more on gaming than any other form of entertainment including music, movies, TV, and books. Strong competition between Xbox and PlayStation has defined the console gaming market over the last 20 years. Exciting new developments in cloud gaming are giving gamers even more choice.
“Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here.
“We have also today sent the companies an explanation of how our concerns might be resolved, inviting their views and any alternative proposals they wish to submit.”
In response to the hold up, Activision Blizzard chief Bobby Kotick said the UK would lose out if it blocks the Microsoft deal.
Warning that the UK would miss a post-Brexit opportunity to attract thousands of jobs if it blocks the deal.
Speaking to the Financial Times, Kotick applied pressure to UK authorities blocking the deal, and said: “It seems like a bit of a fragile government, where’s the leadership?
“If I look at our hiring plans, we’re more likely to find the next 3,000 to 5,000 people that we need in the UK than almost any other country."
If the deal is approved it would become Microsoft's largest acquisition to date, making it the third largest gaming company in in the world in terms of revenue, behind China's Tencent and Sony in Japan.
The CMA has announced it will issue its final report on the acquisition on 26 April 2023.
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