Microsoft is very unhappy that British antitrust regulators have blocked its proposed $US69 billion ($A105 billion) purchase of video game maker Activision Blizzard.
It was to have been the biggest tech deal in history but the UK Competition and Markets Authority (CMA) said ’no’ over worries that it would stifle competition for popular games like Call of Duty in the fast-growing cloud gaming market.
The CMA said in its final report that “the only effective remedy” to the substantial loss of competition “is to prohibit the Merger.”
The companies have vowed to appeal, so the deal is not dead – but a ’no’ decision from the EU’s competition regulators in May could stop the deal completely.
Shares of Activision Blizzard fell more than 11% on Wall Street while Microsoft shares were up 7% but this was mostly due to the company’s strong March quarter earnings report Tuesday.
That price rise added $US150 billion to Microsoft’s market value and $US2 billion to Bill Gates’s worth, so there’s a message there from the company about what its existing businesses can deliver.
By the close of business Microsoft had a market value of $US2.2 trillion, $US400 billion behind Apple.
Microsoft Vice Chair and President Brad Smith said in a statement that the company remains “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,” Smith said Wednesday.
“It’s a big enough market to throw a pretty serious spanner in the works from Microsoft and Activision’s perspective, but things will get a lot worse if they also get the wrong decision from the European Commission in a few weeks’ time,” one analyst said in reference to the UK decision.
The CMA’s concerns centred on how the takeover would affect cloud gaming, which streams to tablets, phones and other devices and frees players from buying expensive consoles and gaming computers.
Gamers can keep playing major Activision titles, including mobile games like Candy Crush, on the platforms they typically use.
The all-cash deal announced 15 months ago faced stiff opposition from rival Sony, which makes the PlayStation gaming system, and also was being scrutinised by regulators in the US and Europe over fears that it would give Microsoft and its Xbox console control of hit game franchises like Call of Duty and World of Warcraft.
Cloud gaming is a technology that enables gamers to access games via companies’ remote servers — effectively streaming a game like you would a movie.The technology is still in its infancy, but Microsoft is betting big on it becoming a mainstream way of playing games. Netflix, the top video streamer, is building its games business around streaming from the cloud.
“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” the CMA said in a press release issued on Wednesday.
Microsoft offered the CMA remedies in an attempt to resolve its concerns — including “requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.” However, the regulator rejected these proposals.
“Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market,” the CMA said.
