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Microsoft’s plan to acquire Activision Blizzard for nearly $69 billion has hit a snag: The UK’s Competition and Markets Authority (CMA) blocked the deal, which would be the largest in gaming history and place Microsoft over Nintendo to make it the third-largest gaming company in the world, the company has said.
Microsoft has already said it plans to appeal the ruling.
The CMA’s reasoning for blocking the deal had less to do with concerns surrounding Activision’s perennially successful Call of Duty franchise but rather Microsoft’s hold on the cloud gaming market.
Microsoft has made a concerted effort to extend its gaming services beyond the Xbox, offering its titles on other operating systems while striking deals with publishers and developers to offer its games on their platforms. It appears this didn’t assuage the CMA’s concerns.
Microsoft’s cloud gaming business, which includes Windows, Azure, and Xbox Cloud Gaming, coupled with the proposed acquisition, “would risk undermining the innovation that is crucial to the development” of the nascent cloud gaming market, the CMA said in a press release. Microsoft accounts for about 60%–70% of global cloud gaming services, according to the CMA.
“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,” Martin Coleman, who chaired the independent panel conducting the CMA’s investigation, said in a statement.
Microsoft’s revenue increased 7% in FY Q3 2023, but the Xbox division was hit hard. Xbox hardware revenue decreased 30% year over year due to lower console sales, and gaming revenue decreased 4% for the same reason. Activision’s stock was down 11% Wednesday morning following the CMA’s announcement.
Activision Blizzard said it would work with Microsoft to appeal the ruling.
“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,” Delaney Simmons, senior director of communications at Activision Blizzard, told Tech Brew in a statement.
But this isn’t the last hurdle Microsoft and Activision will have to clear. They are still awaiting a decision from the EU’s regulatory bodies on the proposed acquisition, while in the US, the Federal Trade Commission sued in December 2022 to block the deal from going through.