UK blocks the Xbox/Activision Blizzard deal (Update: Microsoft statement)

Update, April 26, 2023 (11:37 AM ET): We have received a statement from Microsoft about the news of the UK blocking the company’s acquisition of Activision Blizzard. Here is the statement from Brad Smith, Vice Chair and President at Microsoft:

We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.

Original article, April 26, 2023 (08:48 AM ET): Microsoft announced a $68 billion deal to buy Activision Blizzard in January 2022. The acquisition was subject to regulatory approval, and now the UK’s competition watchdog has blocked the move.

The UK’s Competition and Markets Authority (CMA) announced its decision to block the deal today. It cited concerns that “the deal would alter the future of the fast-growing cloud gaming market.”

Microsoft proposed to address the CMA’s concerns over the deal, but the watchdog cited several “significant” shortcomings with the proposal. These included concerns that Microsoft’s proposal didn’t adequately cover different cloud gaming business models (such as “multigame subscription services”). It also noted that the proposal didn’t accommodate desktop platforms other than Windows. The CMA also cited the standardization of terms and conditions for various games under the merger as a key concern.

In saying so, the CMA added that it didn’t expect the deal to significantly reduce competition in the UK console gaming space.

“Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market,” said Martin Coleman, the chair of the panel behind the investigation.

Microsoft and Activision Blizzard: What next?

Activision Blizzard confirmed in an email to employees that it would lodge an appeal against the decision with the UK Competition Appeals Tribunal. So the two parties haven’t exhausted all their options just yet.

In any event, this is bad news if you were hoping to stream Call of Duty or Overwatch 2 to your phone via an Xbox Game Pass Ultimate subscription. A failed appeal means you’ll either need to buy these games on an existing platform you own, or you’ll need to buy a new console or PC first.

Needless to say, a failed deal would also mean you shouldn’t expect new Activision Blizzard games to be available on Xbox Game Pass from day one.

Microsoft also signed a deal with NVIDIA earlier this year that would bring all Xbox-published games on PC to the GeForce Now streaming service if the Activision Blizzard acquisition was completed. It now stands to reason that this deal won’t apply in the event that Microsoft and Activision Blizzard’s UK appeal isn’t successful.