UK regulator to further investigate Microsoft’s Activision Blizzard purchase

The Competition and Markets Authority in the UK has decided that Microsoft’s acquisition of Activision Blizzard requires further examination in a “phase 2” investigation.

The CMA’s report explains that its initial findings suggest that the deal would give rise to “a realistic prospect of a substantial lessening of competition in gaming consoles, multi-game subscription services, and cloud gaming services” and that the Call of Duty was “important” and “capable of making a material difference to the success of rivals’ gaming platforms.”

“ABK invests significant time and capital in creating regular Call of Duty releases, which consistently rank as some of the most popular games” said the CMA. “These titles require thousands of game developers and several years to complete, and there are very few other games of similar calibre or popularity.”

“PlayStation currently has a larger share of the console gaming market than Xbox, but the CMA considers that Call of Duty is sufficiently important that losing access to it (or losing access on competitive terms) could significantly impact Sony’s revenues and user base”,  says the report, before it goes on to point out several other factors that could lead to problems for consumers and competitors alike.

This includes the fact that while PlayStation has more of the market in the UK right now, “having full control over this powerful catalogue, especially in light of Microsoft’s already strong position in gaming consoles, operating systems, and cloud infrastructure” could result in Microsoft impairing Sony’s ability to compete. 

The authority also explains that when Microsoft has previously acquired studios, including Bethesda and the other Zenimax-owned studios in 2021, it has made the decision to make upcoming games like Starfield and Redfall exclusive to platforms where Xbox Game Pass is available. It believes that moves like these “could outweigh any immediate losses in terms of licensing revenues” should the publisher choose to do the same with Activision Blizzard, as doing so could help to slow down potential rivals before they properly get started. 

“After the Merger, Microsoft would gain control of this important input and could use it to harm the competitiveness of its rivals,” explains the CMA report. “As the multi-game subscription market is still in its infancy, the effect of the Merger could tip or significantly increase concentration in the market in Microsoft’s favour before future rivals have a chance to develop.”

Phil Spencer, CEO of Microsoft Gaming, posted an open letter to the Microsoft Blog earlier today seemingly in response to those fears within the findings. “As we’ve said before, we are committed to making the same version of Call of Duty available on PlayStation on the same day the game launches elsewhere.  We will continue to enable people to play with each other across platforms and across devices.” explained Spencer.

“We know players benefit from this approach because we’ve done it with Minecraft, which continues to be available on multiple platforms and has expanded to even more since Mojang joined Microsoft in 2014.  As we extend our gaming storefront across new devices and platforms, we will make sure that we do so in a manner that protects the ability of developers to choose how to distribute their games.”

“We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition. We respect and welcome the hard questions that are being asked. The gaming industry today is robust and dynamic. Industry leaders, including Tencent and Sony, continue to expand their deep and extensive libraries of games as well as other entertainment brands and franchises, which are enjoyed by players everywhere. We believe that a thorough review will show that the combination of Microsoft and Activision Blizzard will benefit the industry and players.”