UK Blocks $69 Bln Microsoft-Activision Blizzard Deal

U.K.’s competition regulator has prevented the $68.7 billion deal by tech major Microsoft to buy game-developer and publisher Activision Blizzard Inc. over concerns that it would alter the future of the fast-growing cloud gaming market. This is likely to lead to reduced innovation and less choice for UK gamers over the years to come, the regulator believes. In the pre-market session, shares are up 8.24 percent.

The Competition and Markets Authority or CMA in a statement said the Microsoft / Activision deal has been blocked to protect innovation and choice in cloud gaming.

It was in January last year that Microsoft agreed to buy Activision for $95.00 per share, in an all-cash deal valued at $68.7 billion. The acquisition was then expected to close in fiscal 2023.

However, the deal has been facing severe scrutiny ever since from regulators around the world.

In December last year, the U.S. Federal Trade Commission filed an antitrust lawsuit against Microsoft in an attempt to block the acquisition. The FTC alleged that the deal, Microsoft’s largest ever and the largest ever in the video gaming industry, would enable the software behemoth to suppress competitors.

The CMA launched an in-depth review of the deal in September 2022, and in February 2023 provisionally found that the merger could make Microsoft even stronger in cloud gaming, stifling competition in this growing market.

The agency now said the final decision to prevent the deal comes after Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector.

According to CMA, the tech giant 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.

The European Commission also continues to evaluate the deal.

The fast growing UK cloud gaming market’s monthly active users more than tripled from the start of 2021 to the end of 2022.

It is estimated that cloud gaming market would be worth up to 11 billion globally and 1 billion in the UK by 2026. Microsoft already accounts for an estimated 60-70% of global cloud gaming services.

Martin Coleman, chair of the independent panel of experts conducting this investigation, said, “Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. ..Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors.”

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