Game over for Activision
Britain’s Competition and Markets Authority has vetoed Microsoft’s takeover of the videogaming group. Matthew Partridge reports
Microsoft’s $69bn takeover of Activision Blizzard has been dealt a “potentially fatal blow”, says Bloomberg’s Katharine Gemmell. Britain’s Competition and Markets Authority (CMA) has vetoed the tie-up, arguing that it would lead to “higher prices, fewer choices and less innovation for UK gamers”, especially with respect to cloud gaming (playing games online rather than downloading them to a console or PC). Crucially, it said that its concerns “couldn’t be solved by remedies such as the sale of blockbuster title Call of Duty or other solutions”. While Microsoft plans to appeal, “there has never been a successful appeal in the UK on an antitrust decision”.
This is a bad decision, says Brian Albrecht in The Telegraph. It seems “the regulator still thinks of markets as static objects to control, rather than as dynamic processes to foster”. Even if Microsoft did reduce competition by “removing Activision games from competitors’ platforms”, it would “provide a strong incentive for consumers to purchase a console or gaming subscription”, creating “a market with real potential for independent game developers to benefit”. Microsoft also “created the whole idea” of cloud gaming in the first place and is constrained “by the prospect of rivals emerging.
Red flags for regulators
It is certainly “rare” for a UK regulator to be “willing to step into the path of US Big Tech’s steamroller”, says Nils Pratley in The Guardian. Still, Microsoft should have realised that the marriage of “a big content company” like Activision to a “big next-generation platform provider” like Microsoft “was never going to be a slam dunk”. Indeed, both US Federal Trade Commission (FTC) and the European Commission “are also all over it”. What’s more, any promises from Microsoft would have had to be policed, forcing the CMA to dive “into a cloud market that is still in its infancy”. The CMA’s decision seems to have been “lost on Wall Street”, which has “other priorities”, say Richard Waters and Kate Beioley in the Financial Times. Microsoft’s shares actually rose by 7% the same day, after it reported a rebound in its cloud-computing division and “reiterated a determination to capitalise on its early lead in generative AI [artificial intelligence]”. In contrast, pure cloud-gaming platforms “have been slow to take off”, with Google closing its “ambitious” Stadia games project last year and Amazon’s Luna platform struggling to gain traction.
The CMA’s decision has been more negative for Activision, wiping 10% off the shares, says Anita Ramaswamy on Breakingviews. This is not surprising given that Microsoft was willing to pay a 45% premium to Activision’s undisturbed price in January 2022. Still, the stock’s slide seems an overreaction, as the company is highly profitable. Considerable cash reserves, as well as a $3bn breakup fee from Microsoft, would give Activision a “hulking war-chest” to spend on other acquisitions or stock buybacks.