Why is Microsoft being blocked from buying Activision?

Why is Microsoft being blocked from buying Activision?

In what has been described as the largest gaming industry deal, Microsoft attempted to acquire game developer and publisher Activision Blizzard for a whopping $68.7 billion. However, not everyone is convinced that the deal is in the best interest of gamers, sparking concerns about the future of the gaming industry.

At the heart of the disagreement is the Competition and Markets Authority (CMA), a UK government agency, which has blocked the deal from proceeding over concerns about the potential threat to competition and innovation.

What are the issues with the deal?

According to the CMA, the deal raises "competition concerns in the nascent cloud gaming market". Microsoft, owners of Xbox, have amassed a significant collection of valuable gaming franchises, includingCall of Duty, Overwatch, and World of Warcraft.

The CMA believes that if Microsoft were to absorb Activision Blizzard, which owns popular titles like Call of Duty, Guitar Hero, and Candy Crush, it could potentially shut out competitors and limit future innovation in the industry. This could result in customers having fewer options and subsequently, higher prices.

To address these concerns, the CMA has called upon Microsoft to propose solutions that would address these competition concerns before the deal can proceed. However, so far, Microsoft has been unable to convince the CMA to approve the deal.

What are the potential solutions?

In response, Microsoft has offered to restructure the deal to sell off some of Activision Blizzard’s games, such as Call of Duty, back to the original developers.

However, the CMA has rejected this proposal stating that it is unclear how the assets would be transferred and without sufficient guarantees to ensure sustained competition.

Microsoft has also been criticized by the CMA for limiting the availability of its future games on competing platforms such as PlayStation and Nintendo consoles.

How has Microsoft responded?

In statements, Microsoft has expressed a commitment to working with gamers and developers to address concerns regarding the deal.

Microsoft’s Director of Gaming Phil Spencer reassured gamers that the decision to acquire Activision was made to enhance the player experience and that they believe the deal would lead to more choices, more entertainment, and more innovation in the gaming industry".

What’s next for the deal?

Time is running out for both parties to agree on terms. The deadline for approval has been extended from April 1 to late 2023 and if no agreement is made, the deal will cease to exist.

As matters stand, the fate of the deal remains uncertain with both parties entrenched in negotiations. One thing is clear though – the outcome of the deal will have far-reaching implications for the gaming industry and its future trajectory.