UK Regulator Blocks Microsoft’s Acquisition of Activision Blizzard over Concerns of Limiting Players’ Choices in Fast-Growing Cloud Gaming Sector

A spokesperson for Activision said: “The Competition and Markets Authority report contradicts the UK’s ambitions to become an attractive country in the technology business sector.”

The spokesman added: “We will cooperate with Microsoft strongly to change this direction if the decision is appealed.”

He said: “The report’s findings hurt British citizens, who face a very difficult economic future. We will re-evaluate our growth plans for the UK. Global innovation companies, large and small, will notice that the UK, for all its rhetoric, is clearly closed to market”.

Brad Smith, vice chairman and president of Microsoft, said the company remains committed to the acquisition.

“The UK Competition and Markets Authority’s decision goes against the practical course of addressing concerns about competition and discourages technological innovation and investment in the UK,” he added.

“We have already entered into contracts to make Activision Blizzard’s popular games available on an additional 150 million devices, and we remain committed to strengthening these agreements through regulatory steps,” Smith said.

“We are disappointed, especially since, after long discussions, this decision appears to reflect a misunderstanding of this market and the way cloud technology actually works,” he added.

In order to complete the acquisition, the approval of the regulatory authorities in the United Kingdom, the United States and the European Union is required.

Britain’s Competition and Markets Authority is the first of the three regulators to issue its ruling, meaning its decision could hurt the entire acquisition.

But Martin Coleman, who chaired an independent panel examining the proposal for the regulator, said it was necessary to protect competition in the “exciting emerging market” for cloud gaming.

He added, “Microsoft already has a strong position and edge over other competitors in cloud games, and the deal would enhance this advantage in a way that would ensure that it has the ability to undercut new and innovative competitors.”

He said that Microsoft put forward plans aimed at addressing the concerns of the British Competition and Markets Authority, but they were not effective and rather “addressed ineffective regulations rather than the issue of competition.”

“Cloud gaming needs a competitive, free market to drive innovation and choice. The best way to do that is to allow the existing competitive mechanisms in cloud gaming to continue to function,” Coleman added.

For Microsoft, this deal, in addition to the large investment, is of great importance, given that the company wants to strengthen its position in the gaming market in the future.

“The standard financial model is to buy one gaming platform and then buy games to play,” said Keisa McDonald, games editor at The Guardian, ahead of the UK Competition and Markets Authority’s decision.

“But what’s happening now is that cloud computing and other technologies are creating an opportunity for a kind of Netflix game, where you stream the games instead of owning them,” she added.

She said: “It is something that Microsoft is already investing heavily in, and it has its own (Game Pass) service, in exchange for a monthly subscription that gives you access to a full set of games. Microsoft hopes eventually that (the user) can play all these games on his phone, or your console or your TV”.

“Microsoft is playing a role in the future of video games, not just in the current gaming hardware market. It’s a really important part of this deal,” she added.

McDonald said that when it comes to games, Microsoft is doing its best to compete with companies such as “Sony” and “Nintendo”.

She added, “Sony has always been ahead of the game in high-quality games, and Microsoft has never had games to compete with at this level. This is a way to control the future of many very popular games.”

It is clear that the solutions that Microsoft has presented so far in an effort to convince the British Competition and Markets Authority that this deal will not have any negative impact on the future of cloud gaming have not worked.

Microsoft has contracts with some of the current major players in the cloud gaming sector, such as technology company NVIDIA, but more concessions will still need to be made if they want to change course.

Without an agreement here, the whole process will come to a halt.

There was also a sense of shock among the UK gaming sector because of this decision, after public expectations of its approval.

Despite this, the decision satisfies the heads of Sony, who have always objected to the deal, arguing that its “PlayStation” platform would have been affected by undermining access to some of the most famous games in the world, which would negatively affect players.