The UK’s Competition and Markets Authority (CMA) has given its provisional approval for Microsoft’s proposed acquisition of Activision Blizzard. The CMA has concluded that the deal will not significantly lower competition in the console gaming services market, as the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any potential gains.
The acquisition, announced in January 2022, will see Microsoft acquire Activision Blizzard for $68.7 billion. The deal is the largest in the gaming industry’s history and has raised concerns about its impact on competition in the market.
One of the key concerns of the CMA was the possibility that Microsoft could use its ownership of Activision Blizzard to withhold popular game titles, such as Call of Duty, from rival console platforms. This could harm competition in the console gaming services market by limiting consumer choice and increasing prices.
However, the CMA determines that the expense to Microsoft of refraining from releasing Call of Duty on PlayStation would surpass any possible benefits that could be derived from such a move. This means that there is no significant risk of Microsoft using its ownership of Activision Blizzard to harm competition in the console gaming services market.
The CMA has also raised concerns about the impact of the deal on the emerging cloud gaming market. Cloud gaming allows users to stream games over the internet, eliminating the need for expensive hardware and allowing for greater flexibility in gameplay. The CMA is concerned that the acquisition could harm competition in this market by limiting consumer choice and increasing prices, similar to the console market.
To curb these concerns, Microsoft recently made cloud gaming deals with Boosteroid and Ubitus. Also, a deal with NVIDIA in February to bring XBOX PC games to GeForce Now. All 10-year agreements.
The CMA will continue to investigate the impact of the deal on the cloud gaming market and will announce its final decision on the acquisition later this year. However, resolving the Call of Duty issue is a significant step toward the deal’s approval.
Microsoft has stated that acquiring Activision Blizzard is part of its strategy to expand its gaming business and compete more effectively with rivals such as Sony and Nintendo. The deal will give Microsoft access to various popular game franchises, including Call of Duty, World of Warcraft, and Candy Crush.
The acquisition will also expand Microsoft’s presence in the esports market, which is growing rapidly and is expected to be worth $3 billion by 2025. Activision Blizzard owns Overwatch and the Call of Duty, two huge esports franchises.
The acquisition has been controversial, with some critics arguing that it will harm competition in the gaming industry and reduce consumer choice. However, Microsoft has argued that the deal will benefit consumers by allowing it to invest more in game development, create new and innovative gaming experiences, and compete with rivals.
In summary, the CMA’s provisional conclusion that Microsoft’s acquisition of Activision Blizzard will not harm competition in the console gaming services market is a significant step toward the deal’s approval. However, the CMA’s concerns about the impact of the acquisition on the cloud gaming market mean that the final decision on the deal is still pending. The acquisition is a major move by Microsoft to expand its gaming business and compete more effectively with its rivals, and its impact on the gaming industry will be closely watched by industry analysts and consumers alike.
Source: CMA
