Britain's Competition and Markets Authority (CMA) has blocked Microsoft's $69 billion acquisition of Activision Blizzard, the makers of popular video games like Call of Duty, Candy Crush, Overwatch, and World of Warcraft. The decision is a significant setback to Microsoft's ambitions in the gaming industry, and it is the biggest-ever deal in gaming that the CMA has blocked. The regulator is concerned that the acquisition could hinder competition in cloud gaming, which is an emerging market predicted to be worth $13.7 billion globally by 2026.
The CMA's decision comes after dropping its concerns last month about the impact of the deal on the console market led by Sony's market-leading PlayStation, leaving cloud streaming services as the remaining hurdle. To overcome the challenge, Microsoft had entered into licensing agreements with the proprietors of streaming platforms such as Valve, Nvidia, and Boosteroid. It had also offered Sony a 10-year Call of Duty license, in line with an agreement to bring the franchise to Nintendo's Switch.
However, the CMA concluded that Microsoft's commitment to offering access to Activision's Call of Duty franchise to leading cloud gaming platforms would not effectively remedy its concerns. The regulator said that cloud gaming is growing fast, 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. Therefore, it is essential to protect competition in this emerging and exciting market.
Microsoft's president, Brad Smith, said the company remained fully committed to the acquisition and would appeal the decision, while Activision said it would "work aggressively" with Microsoft to reverse it. Upon hearing the news, Activision's CEO Bobby Kotick informed the company's staff that it was not the desired outcome, but he believed it was not the final decision on the deal.
The unexpected blow to the deal has had a significant impact on the company's stocks. Activision's shares fell nearly 12 per cent to $76.65, moving further from Microsoft's offer price of $95 per share, erasing nearly $8 billion in market valuation. Meanwhile, Microsoft's shares rose to their highest in over a year, a day after beating Street estimates for quarterly revenue and profit.
Europe will decide on the Activision deal by May 22, meanwhile, the US Federal Trade Commission is also seeking to block it.
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