In a surprising turn of events, the United Kingdom’s antitrust regulator has decided to block Microsoft’s proposed $69 billion acquisition of Activision Blizzard, the gaming giant behind the “Call of Duty” franchise. The UK Competition and Markets Authority (CMA) has cited concerns that the deal would negatively impact competition within the burgeoning cloud gaming industry.
Despite Microsoft’s promise to provide access to Activision’s lucrative “Call of Duty” series to major cloud gaming platforms, the CMA remains unconvinced that this would adequately address its concerns. Both Microsoft and Activision have expressed their commitment to the acquisition and their intention to appeal the decision.
Following the news, Activision’s share price dropped by nearly 12%, potentially reducing the company’s market value by close to $8 billion. Despite posting better-than-expected quarterly results, Activision’s performance has done little to assuage investor worries about the UK’s intervention.
Microsoft’s bid to acquire Activision Blizzard, which was first announced in January 2022, aimed to enhance its presence in the competitive video gaming market, currently dominated by Tencent and Sony. Analyst Kirk Materne of Evercore ISI expects that Microsoft will continue to fight for the acquisition. However, if the tech giant decides to abandon the deal, over $60 billion in cash flow could be directed towards other investments, such as AI-related offerings.
This development marks the largest technology-related deal blocked by the CMA, demonstrating the UK watchdog’s willingness to take on major tech companies. In 2021, the CMA also blocked Meta’s acquisition of Giphy. The fate of the Activision deal now lies in the hands of European regulators, who are set to make their decision by May 22, while the US Federal Trade Commission is also seeking to block the acquisition.
The CMA’s decision has placed cloud streaming services at the center of the debate. Microsoft had attempted to address these concerns by signing licensing agreements with streaming platform owners like Valve Corp, Nvidia, and Boosteroid. The regulator highlighted the rapid growth of the cloud gaming market, which is expected to be valued at $13.7 billion globally by 2026, emphasizing the importance of preserving competition in this emerging market.