Microsoft acquisition of Activision Blizzard blocked by UK regulators

Since its announcement over a year ago, Microsoft’s stunning purchase of Activision Blizzard has been going through the approval processes in various markets to determine if such a large merger satisfies local competition laws. Just as the merger seemed to be coming to a close with various countries approving the deal, regulators in the UK have blocked it, and perhaps not for the reason you might assume.

Following the review of 3 million documents and various testimonies from both the participants of the merger, and from Sony, its chief competitor in the console gaming space, the regulators have voted to block the deal. While one might predict that the reason is due to the controversy of making such famous franchises like Call of Duty potential Xbox exclusives, the actual point of contention ended up being Microsoft’s cloud gaming ambitions.

According to the UK’s Competition and Markets Authority, “Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.”

It’s a bit of an odd thing to centre an objection around, considering cloud gaming is still pretty niche and not even available in many markets. Xbox Cloud Gaming was only made available in Australia relatively recently, and Sony and Nintendo’s cloud gaming efforts have not even rolled out over here yet. That said, as install and download sizes have swelled in recent years, it is not inconceivable that cloud gaming will form a greater part of the gaming ecosystem in the next few years, assuming local internet infrastructure keeps up with it.

This news has not been great for Activision Blizzard, which saw its stock fall by 10% following the news. The studio released an official statement, advising that “the CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses. We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”

This doesn’t necessarily mean that the merger is dead in the water. It is certainly expected that an appeal will be launched to dispute the decision and make a new case for the acquisition. In the meantime, we will have to wait and see what the outcomes of that will end up being.