Regulator sets back Activision deal

The UK’s Competition and Markets Authority (CMA) “came down squarely against Microsoft’s proposed $69bn acquisition of Activision Blizzard” last week, says Kyle Orland on Ars Technica. The regulator said that the deal risks “weakening the important rivalry between Xbox and PlayStation gaming consoles”.

It is worried about competition in cloud gaming, where Microsoft accounts for 60%70% of the global market. The decision is not final, but it represents “the largest setback yet for a deal that has faced increasing scrutiny from governments worldwide”.

The CMA’s judgement is “likely to set the tone for US and European counterparts”, says Alistair Osborne in The Times. It proposes Microsoft divest some of Activision’s business, such as its Call of Duty franchise – a condition “guaranteed to blow up the deal”. You have to wonder “how much is Microsoft really up for a fight”, especially since it struck this deal in January last year, “before the tech rout crashed company valuations”.

Selling off the blockbuster Call of Duty franchise might be painful – it brought in around $3.1bn in revenue last year, equal to 38% of Activision’s total top line, say Jonathan Guilford and Karen Kwok on Breakingviews. But the rest of Activision holds a lot of value, including its mobile-gaming division. At the same time, its PC-focused Warcraft franchise is “enduringly popular”: a version first released in 2004 is still the 13th most-watched game on streaming site Twitch over the last month. Overall, even if it is forced to divest parts of Activision, Microsoft “still has a lot to play for”.