UK regulator says $100b Xbox deal harms gamers

The UK’s competition regulator has said that Microsoft’s proposed $100 billion acquisition of Activision Blizzard could harm gamers.

The UK’s competition regulator has released a provisional report on the proposed acquisition of Activision Blizzard by Microsoft, raising concerns about the deal if it should go ahead.

The report, released today by the UK’s Competition and Markets Authority (CMA) said that the proposed deal could harm gamers and the market, leading to “higher prices, fewer choices, or less innovation”.

The regulator outlined two major concerns with the acquisition, the first being that it could harm the state of competition in the cloud gaming sector. Microsoft currently operates the most successful cloud gaming platform through its Xbox Game Pass service.

“Being able to offer popular games will be important for cloud gaming providers to attract users as the market continues to grow and develop,” the report reads, “The evidence available to the CMA currently indicates that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service”.

The CMA notes that Microsoft currently accounts for approximately 60-70% of the cloud gaming market, and also has an advantage in the way of Windows and its Azure web infrastructure.

The other major concern noted by the CMA was in regards to competition in console choice by consumers. The regulator said that there was evidence that Microsoft has an incentive to make games like Call of Duty exclusive to its own consoles, or to make it available on PlayStation consoles in “materially worse conditions”.

Microsoft offers cloud streaming through its Xbox Game Pass subscription service. Picture: Microsoft

Microsoft said that it had offered to enter into long-term agreements with Sony, Nintendo, and Steam to offer access to Call of Duty for at least ten years, which was noted by the CMA as something that “might satisfactorily remedy [its] concerns”.

The CMA says that it will be accepting responses to its provisional report from interested parties until the end of February, and will hand down its final report before April 26, 2023.

Rima Alaily, Microsoft’s corporate vice president and deputy general counsel, responded to the report by saying that Microsoft was “committed to offering effective and easily enforceable solutions that address the CMA’s concerns”. Alaily also said that the company would provide “100% equal access” to Call of Duty, with parity on content, features, quality, and playability.

Call of Duty has been at the core of much of the discussion surrounding the deal. Picture: Activision Blizzard

Xbox head Phil Spencer recently said that Microsoft was “confident” that the $100 billion deal will succeed, saying that regulators are more likely to approve the deal the more they know about the industry.

Written by Oliver Brandt on behalf of GLHF.