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On Wednesday, UK antitrust regulators blocked Microsoft’s plans to buy video game giant Activision Blizzard for $69 billion. It’s a major hurdle in what would be AOL’s biggest consumer tech acquisition since it bought Time Warner 20 years before him.
The UK Competition and Markets Authority said in a statement that Microsoft’s proposed settlement “failed to effectively address the concerns of the cloud gaming sector.” Cloud gaming is an early technology that bypasses the need for hardware like game consoles and allows you to stream your games to your own devices.
Martin Coleman, chairman of the panel that conducted the CMA study, said, “Microsoft already has a strong position and a head start in cloud gaming compared to other competitors. This deal will strengthen that advantage. , can undermine new and innovative competitors.” , said in a statement.
The announcement bolstered efforts by the Federal Trade Commission to block the takeover. Microsoft hoped to undermine FTC Chairman Rina Kern’s challenge to the deal by reaching a settlement with UK regulators and its European Union counterparts.
The decision in the UK is a red flag for big tech companies looking to make big deals despite heightened government scrutiny. Lawmakers and regulators have threatened numerous steps in recent years to curb companies such as Microsoft, Amazon, Apple, Google and Facebook owner Meta. They claim that these companies dominate culture, communications and commerce too much.
Microsoft said it will appeal the ruling.
“After lengthy deliberation, this decision reflects a misunderstanding of how this market and related cloud technologies actually work,” Brad Smith, president of Microsoft, said in a statement. I am particularly disappointed that it seems to be.
Activision, the publisher of blockbuster games like Call of Duty, said it would “actively cooperate” with Microsoft to overturn the ruling.
Bobby Kotick, Activision CEO, said:
The decision is good news for FTC Chairman Khan. Khan has made difficult mergers central to his attempts to curb the power of big tech companies. After an unsuccessful attempt to stop Meta from acquiring the virtual reality startup, the agency’s claims to the giant Microsoft deal are the most prominent remaining challenge to consolidation in the tech industry.
“When you look at the overall portfolio of merger-related work they do now, this is very important,” said William E. Kovacic, former chairman of the agency. An FTC spokesman did not immediately respond to a request for comment.
Microsoft announced its acquisition of Activision early last year, hoping to combine Microsoft’s Xbox console and video game subscription service with Activision’s blockbuster games such as Call of Duty, World of Warcraft and Candy Crush. .
At the time, Activision was reeling from a California lawsuit that accused it of fostering a toxic and sexist workplace culture, and Kotick was being asked to resign.
For over a year, discussions about the deal have largely centered on what happens to the hundreds of millions of people who play Activision’s games. Sony is making its PlayStation console a competitor to Microsoft’s Xbox. Sony argued that fans of Call of Duty and other of his Activision titles, who can currently play games on Xbox and PlayStation, would be forced to use only Microsoft’s consoles and services.
Sony did not immediately respond to a request for comment on the ruling.
Microsoft said it wasn’t looking to limit Call of Duty to the Xbox, arguing that the acquisition would actually make the game accessible to more people. It focused on reaching settlements with regulators outside the U.S. and closing the deal on a conditional basis. It also offered the gaming platform guaranteed access to Call of Duty to demonstrate that it doesn’t limit popular games on other consoles.
UK regulators said in February that initially, the deal was part of the nascent cloud gaming industry, which involved game consoles such as PlayStation and the use of the power of remote data centers to stream games to devices such as iPhones and computers. He said it would hurt the competition. But he said in late March that the company had reversed course and no longer believed the deal posed a threat to Sony.
Instead, CMA has set its sights on the cloud gaming market. The popularity of cloud gaming is exploding, and could eventually reach $14 billion globally and $1.3 billion in the UK by 2026.
“The cloud will eliminate the need for expensive consoles and PCs for UK gamers, giving them much more flexibility and choice in how they play,” the CMA wrote in Wednesday’s ruling. “Allowing Microsoft to occupy such a strong position in the cloud gaming market, which has begun to grow rapidly, risks undermining the innovation that is essential to the development of these opportunities.”
In recent months, Microsoft has signed a number of deals promising to keep Activision games playable on cloud streaming platforms such as Nvidia’s GeForce Now streaming service for 10 years. However, he said the CMA does not fully cover cloud business models.
“This is a big blow to closing the deal,” said Piers Harding-Rolls, a games researcher at London-based analytics firm Ampere Analysis. “This will inevitably slow things down and affect Xbox’s commercial plans.”
Activision shares fell more than 10% in pre-market trading. High-trading Microsoft shares rose about 8% after reporting better-than-expected earnings on Tuesday.
Karen Way Contributing to reporting from Seattle, Adam Sataliano from London.
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