After Bobby Kotick tries to scare them off, UK regulators say they’ll oppose Activision Blizzard deal
Yesterday Bobby Kotick gave a pair of interviews to CNBC and The Financial Times, during which Activision Blizzard’s longtime CEO was typically bullish about Microsoft’s proposed $68.7 billion acquisition of the publisher (opens in new tab). Kotick pointed at comments from UK prime minister Rishi Sunak about the UK becoming “the Silicon Valley of Europe,” and warned that “if deals like this can’t get through, [the UK’s] not going to be Silicon Valley, [it’ll] be Death Valley”. Then he said the UK’s regulator “lacked independent thought”.
Well, that’s nice. In a piece of perfect timing, the UK’s Competition and Markets Authority (CMA) has today issued its findings (opens in new tab) after a preliminary investigation of the deal, and it looks likely to recommend further scrutiny. Its biggest issues are that it reckons the merger would make Microsoft big enough in cloud gaming that it would stifle competition, harm consumers by weakening the rivalry between PlayStation and Xbox, and potentially “result in higher prices, fewer choices, or less innovation for UK gamers.”
This follows a five-month investigation by the CMA, during which it visited various studios and stakeholders, discussed things with the leadership of Microsoft and Activision Blizzard, analysed “over 3 million internal documents from the two businesses”, surveyed gamers in the UK, and gathered evidence from competitors.
When it comes to cloud gaming, the CMA’s concerns are fairly simple: Microsoft “would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service” or only available on other services with worse terms. This matters because by the CMA’s estimate Microsoft already accounts for 60-70% of global cloud gaming offerings, and has a large and multi-faceted infrastructure behind that already. So the CMA is saying that, if this deal goes through, we may well be rubber-stamping a monopoly.
The CMA, as it has from the very start, also focused on Call of Duty. Microsoft has attempted to handwave these concerns away by offering things like its much-vaunted 10-year deal to keep the series on PlayStation but, as the CMA rightly noted in October 2022, contracts can be broken and promises too. On the point of making the series exclusive comes this seemingly innocuous line which translates as ‘we don’t believe you’: “The CMA’s provisional findings note that this strategy, of buying gaming studios and making their content exclusive to Microsoft’s platforms, has been used by Microsoft following several previous acquisitions of games studios.”
“It’s been estimated that there are around 45 million gamers in the UK, and people in the UK spend more on gaming than any other form of entertainment including music, movies, TV, and books,” said Martin Coleman, chair of the independent panel of experts conducting this investigation. “Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here.”
The CMA has sent the companies involved its findings and an explanation, invited their views and alternative proposals, and wants responses to its provisional findings by March 1. It will then take everything the investigation has done into account and deliver a final report by the auspicious date of 26 April 2023.
What may bother the suits here is that, unlike several other jurisdictions that have waved things through, the UK has a relatively robust market regulator that, if it chooses to do so, can basically cause endless problems. Can the CMA actually stop this deal? That still seems unlikely, but what will be worrying one Mr. Kotick is how much attention the other big regulators are paying to this, and if they too decide they’re up for the fight.
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