Microsoft’s takeover of video games company Activision Blizzard has been blocked by British competition watchdogs.
(Photo: dpa)
London, Dusseldorf The takeover of the video game manufacturer Activision Blizzard by the software group Microsoft has suffered a major setback. The British competition authority, the Competition and Markets Authority (CMA), surprisingly blocked the project.
The cartel watchdogs justify their veto by saying that the purchase could restrict competition in the cloud-based market for computer and video games. The $69 billion deal would be the largest takeover to date in the fast-growing gaming industry.
Analysts had expected the CMA to approve the mega deal. Activision shares fell more than 10 percent in premarket trading. Microsoft was able to assert itself thanks to good quarterly results.
The British antitrust authority is not the only one investigating the deal more closely. In the USA, the competition authority Federal Trade Commission (FTC) has already filed a lawsuit against the project. A court hearing is still pending. The EU antitrust authorities also want to pass their judgment in May, after they had already decided on high conditions for the takeover.
“Call of Duty” is about a billion-dollar game
British antitrust authorities fear the merger could result in higher prices, less choice and less innovation. In addition, Microsoft would expand its market power if the group were to gain control of blockbuster games “Call of Duty”, “Overwatch” and “World of Warcraft”.
“Microsoft already enjoys a strong position and lead over other competitors in the cloud gaming space, and this deal would reinforce that advantage and give the company the ability to undermine new and innovative competitors,” said Martin Coleman, chair of the independent panel of experts the CMA.
A view shared by various of Microsoft’s competitors. According to industry circles, the Japanese competitor Sony in particular is worried about the deal coming about. Its Playstation is the leader in the console sector, but the manufacturer has not yet been able to establish a cloud offer independent of the purchase of the device.
The fear: If gamers can only play games like “Call of Duty” with a Microsoft account, they will move away from the Playstation altogether. The “Call of Duty” series in particular is one of the most economically successful game franchises of all. So far, the parts of the series have appeared across different systems such as Microsoft’s Xbox, PC and Sony’s Playstation.
Microsoft continues to pursue the takeover
Crucial for the cartel watchdog was that Microsoft already has a strong market position in the games market. With the Windows computer operating system, a global cloud infrastructure and a widespread game console and game collection, the company has great market power.
The group bundles its gaming activities in the so-called Game Pass, which offers access to games on various platforms. “No other cloud gaming provider has this combination of advantages, which partly explains Microsoft’s current market share of 60 to 70 percent in the UK,” according to the CMA.
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Microsoft was initially unimpressed by the veto from London: “We are sticking to this takeover and will appeal,” said President Brad Smith. The CMA’s decision would stifle technological innovation and investment in the UK. A spokesman for Activision said: “The CMA report contradicts the UK’s ambitions to become an attractive country for developing technology companies.”
The two companies had bet that licensing the games to competitors in the cloud would allay the concerns of competition watchdogs. The UK is the sixth largest market for video games in the world, according to market researchers from Newzoo. China is ahead, followed by the USA.
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