A few days ago, the UK Competition and Markets Authority (UK CMA) released its provisional findings on an investigation it conducted into Microsoft’s acquisition of Activision Blizzard. And it found a few issues.

So in today’s Finshots, we see why the UK CMA has a problem with this mega deal.

The Story

In January 2022, Microsoft announced one of the biggest acquisitions in tech history. It wanted to buy out Activision Blizzard, a popular video game company in an all-cash deal for close to $69 billion.

When the announcement came in, we wrote about it here and told you how Microsoft was firmly betting its gaming future on building a huge content library. And how Activision could help it get there.

But there’s been an issue.

This blockbuster deal has hit a roadblock. Competition commission authorities from over the world are looking at this deal and seeing if it affects the gaming industry in their country. Last November the European Commission opened an investigation to see if it significantly affects competition. In December the US Federal Trade Commission opened an investigation too.

And now, after over 6 months of digging into over 3 million internal business documents from Microsoft and Activision, 2,100 public e-mails on the transaction and more, the UK Competition and Markets Authority (UK CMA) has rolled out a 277-page report.

What does it say?

It simply isn’t happy about the merger.


Well, here’s the thing. Think about the competitive space for games and imagine what names come to your mind.

You’ll probably say names like Sony’s PlayStation, Nintendo and Microsoft’s Xbox. So when a deal like this happens it has the potential to reduce competition in the gaming market.

See, Activision makes a lot of popular games like Call of Duty, World of Warcraft and Candy Crush. Call of Duty is so popular that when CoD Modern Warfare II was released last October, it garnered $800 million worldwide in the first three days.

CoD runs on two gaming consoles ― Xbox and PlayStation. And the game is very important to the latter. The UK CMA found out from a survey that if CoD were no longer available on PlayStation, nearly a quarter of them would simply switch to another console that offered the game.

And a step like this will obviously hurt Sony’s ability to continue investing in games and hardware. In fact, Microsoft has acquired a lot of gaming studios like Mojang and ZeniMax over the years. And in all its past acquisitions, it played one card quite consistently. Exclusively releasing new versions of games. And Microsoft could do the same with CoD too.

It could make new versions of CoD and only make it available on Xbox. Microsoft could also sell more Game Pass Subscriptions (a subscription where gamers can have unlimited access to Microsoft’s gaming library).

And in the CMA’s view, Microsoft could come to control how people choose gaming consoles. Activision is by far Microsoft’s biggest gaming studio acquisition. So any future popular titles that it releases could influence gamers’ buying decisions. And Microsoft could dominate the supply of gaming consoles in the market as well as the cloud gaming industry.

Now some might look at this and go— “Isn’t Sony doing the same thing? Why is the competition commission in the UK only looking at Microsoft?”

Well, they do have a point. Sony also publishes exclusive titles. For instance, the popular game “The Last of Us” has remained a “Sony PlayStation” exclusive for over a decade now. You can’t play it on a Microsoft console. And Sony has greatly benefited from their association with Naughty Dog — the studio responsible for developing the game. In fact, Sony acquired Naughty Dog, the same way Microsoft intends to acquire Activision.

So why treat both companies differently?

Well for one, Sony acquired Naughty Dog in 2001 when they were still a fledgeling studio. And they definitely did not have a portfolio of games as extensive as Activision. There’s also the matter of scale. Games like Last of Us are popular titles no doubt. But the series (both Last of us 1 & 2) have sold only 37 million copies so far. The Call of Duty series meanwhile (published by Activision) has sold 400 million copies worldwide. So if Microsoft were to make Call of Duty an exclusive title, it could significantly sway a customer's decision. It could leave PlayStation in the dust thereby affecting its ability to invest in new games. This could have a detrimental impact on consumers — who may be confined to just one console option i.e. Microsoft Xbox.

Put another way, if Sony were acquiring Activision, it’s likely that the UK competition commission would have investigated that deal too.

So the only question left now is — what happens now?

Well, for starters, this isn’t the final order. These are only provisional observations. But despite the nature of the report, it is likely that the competition commission in the UK would block the deal if Microsoft doesn't make some compromise.

It’s possible that Microsoft could agree to make Call of Duty available on all consoles, but the Competition Authority wouldn’t concede to this. They’ve said that their preferred options include a partial sale or Microsoft spinning Activision off as a separate entity.

Will Microsoft agree to this?

Well, we will just have to wait and see.

Until then…

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