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The United Kingdom’s Competition & Markets Authority (CMA) has released its provisional report on Microsoft’s proposed acquisition of Activision Blizzard, and it doesn’t read like good news for Microsoft and others who want to see the deal go through. The CMA said it has “provisionally concluded” that the buyout “could result in higher prices, fewer choices, or less innovation for UK gamers.” The CMA also outlined potential ways for Microsoft to have the deal approved, and one is divesting of the Call of Duty business.
In a press release, the CMA said its investigation found that the deal “raises concerns about cloud and console gaming,” going on to state that the merger could make Microsoft “even stronger in cloud gaming.” This, in turn, could stifle competition and harm UK gamers unable to afford “expensive consoles.” The report went on to provisionally state that the deal, in its current form, “could also harm UK gamers by weakening the important rivalry between Xbox and PlayStation gaming consoles.”
The provisional report is based on what the CMA called a “wide-ranging investigation” that took place over the past five months. Business leaders at Microsoft and Xbox spoke with the CMA, and the group analyzed more than three million internal documents from both Microsoft and Activision Blizzard to “understand their views on the market.” The CMA also said it commissioned an independent survey of UK gamers and spoke with other publishers and cloud gaming service providers as part of making its decision.
The report went on to state that the CMA has seen evidence that indicates Microsoft “would find it commercially beneficial” to make Activision games exclusive to its own cloud gaming service. “This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC,” the CMA said.
On the console side, the CMA said Call of Duty plays an important role in the rivalry between Xbox and PlayStation consoles. The CMA said Microsoft would find it commercially beneficial to make Activision’s games, including Call of Duty, exclusive to Xbox, or only available on PlayStation under “materially worse conditions.” Microsoft seemingly does not agree, as the company has said making Call of Duty exclusive to Xbox would be a disastrous business decision for Microsoft. Not only that, but Microsoft has pledged to keep releasing new Call of Duty games on PlayStation for the next 10 years, and also bring the series to Nintendo platforms. Microsoft Gaming CEO Phil Spencer has also said Microsoft, should it be able to purchase Activision Blizzard, would release the “same” version of Call of Duty across platforms.
The CMA’s report went on to say that Microsoft has a history of buying studios and making their games exclusive to Microsoft platforms. Indeed, after Microsoft bought ZeniMax, it plans to have Starfield and Redfall be exclusive to Xbox on console, and also released on PC.
“The CMA provisionally found that weakening competition by restricting the access that other platforms have to Activision’s games could substantially reduce the competition between Xbox and PlayStation in the UK, in turn harming UK gamers,” it said. “Xbox and PlayStation compete closely with each other at present and access to the most important content, like CoD, is an important part of that competition. Reducing this competition between Microsoft and Sony could result in all gamers seeing higher prices, reduced range, lower quality, and worse service in gaming consoles over time.”
The CMA is not closing the book on the proposed merger just yet, though. The government group provided a list of “remedies” that Microsoft could take to help get the deal approved. One such remedy is a very big one, and that would be a “partial divestiture” of Activision Blizzard. This could include Microsoft divesting of the Call of Duty business entirely, or divesting of the Activision business unit inside Activision Blizzard. A third remedy could be for Microsoft to divest of both the Activision and Blizzard divisions. In essence, this seems to read like the CMA is proposing that Microsoft would have an easier time getting the deal done if it drops Activision and the Call of Duty series from the proposed merger of Activision Blizzard.
Microsoft has indeed said that its main reason for trying to buy Activision Blizzard is to get a foothold into the mobile game space via Activision Blizzard’s Candy Crush series and other mobile properties. However, whether or not Microsoft would feel the buyout is worth it without Call of Duty remains to be seen. Keep checking back with GameSpot for the latest.
“We are committed to offering effective and easily enforceable solutions that address the CMA’s concerns. Our commitment to grant long term 100% equal access to Call of Duty to Sony, Nintendo, Steam and others preserves the deal’s benefits to gamers and developers and increases competition in the market,” Microsoft executive Rima Alaily said in a statement. “75% of respondents to the CMA‘s public consultation agree that this deal is good for competition in UK gaming. When we say equal, we mean equal. 10 years of parity. On content. On pricing. On features. On quality. On playability.”
The CMA will release its final report on or before April 26, 2023.
Activision Blizzard executive Lulu Cheng Meservey said, “We look forward to addressing the CMA’s concerns, and we’re confident this deal is good for players and good for competition in the gaming industry.”
In the US, Microsoft’s proposed buyout of Activision Blizzard is facing a tough road, too. The FTC has sued Microsoft to try to block the deal, and the case is pending.
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