The provisional findings of a CMA investigation suggest that Microsoft’s plan to acquire Activision may lead to higher costs, limited options, and reduced innovation for UK gamers.
The Competition and Markets Authority (CMA) has released its provisional findings after conducting a comprehensive investigation over the past five months to assess the market and potential effects of Microsoft’s proposed acquisition of Activision. The investigation included visits to both companies, a review of over 3 million internal documents, a survey of UK gamers, and gathering evidence from various gaming console makers, game publishers, and cloud gaming providers. Business leaders at Microsoft and Activision were also heard at hearings.
The CMA’s provisional findings indicate that having access to popular games will be crucial for cloud gaming providers in attracting users as the market expands. The evidence suggests that it would be commercially advantageous for Microsoft to restrict Activision’s games to its cloud gaming platform, or only allow access to other platforms under less favorable conditions. Microsoft holds a dominant position in the global cloud gaming industry, accounting for 60-70% of the market, and has additional strengths in cloud gaming through its ownership of Xbox, the top PC operating system (Windows), and a worldwide cloud computing infrastructure (Azure and Xbox Cloud Gaming).
The CMA determined that if Microsoft were to purchase one of the world‘s most prominent game publishers, it could potentially strengthen their power in the cloud gaming market in the UK and reduce competition. This could have a significant impact on the gaming industry and be detrimental to UK gamers, particularly those who are unable to afford or don‘t want to buy a costly gaming console or gaming PC.
The CMA discovered that a select few games, such as Activision‘s Call of Duty (CoD), are essential for competition between consoles. The evidence presented to the CMA, including data about how Microsoft typically gauges the value of customers, currently suggests that Microsoft would benefit commercially by making Activision‘s titles exclusive to its own consoles (or only available on PlayStation under less desirable terms). The CMA‘s provisional findings note that Microsoft has employed this strategy, of buying gaming studios and making their content exclusive to its platforms, after several prior acquisitions of game studios.
Microsoft And Activision Deal
In January 2022, Microsoft announced a $68.7 billion agreement to acquire Activision, one of the most renowned video game publishers in the world. This transaction is the biggest video game acquisition ever, as well as the largest acquisition Microsoft has ever made.
Gaming is the predominant form of entertainment in the UK, with consumers spending more money on gaming than on pay TV, video streaming, cinema, music, or books. In 2022, a total of £5 billion was spent on gaming in the UK. There are thousands of games available on consoles and PCs, but gamers dedicate much of their time and money to a few well–known ‘AAA’ games.
Activision produces CoD, one of the most prominent AAA games in the industry. In September 2022, the CMA initiated an extensive investigation into the deal with the assistance of an independent panel of experts. The investigation is being conducted in conjunction with similar probes in the US and the EU, in addition to other international jurisdictions.