Uk Blocks Microsoft’s $69 Billion Deal with Activision Because of Worries About Cloud Games.

Uk Blocks Microsoft's $69 Billion Deal with Activision Because of Worries About Cloud Games.

Britain will stop Microsoft from buying “Call of Duty” maker Activision Blizzard for $69 billion because it might hurt competition in cloud gaming. This is a big surprise for the biggest deal in gaming history.

On Wednesday, the country’s antitrust regulator said that Microsoft’s promise to give top cloud gaming platforms access to Activision’s multi-billion dollar “Call of Duty” series would not be enough to address its concerns.

In a statement, Brad Smith, the president of Microsoft, said that the company was still fully committed to the acquisition and would appeal the decision. Activision, on the other hand, said it would “work aggressively” with Microsoft to get it changed.

Bobby Kotick, the CEO of Activision, told his employees, “This is not the news we wanted, but it is far from the last word on this deal.”

In a separate statement, the company said, “We will reevaluate our growth plans for the UK.” “Big and small innovators around the world will notice that, despite all the talk, the UK is closed for business.”

Shares of Activision, which makes games like “Candy Crush,” “Overwatch,” and “World of Warcraft,” dropped nearly 12% to $76.65, which is further from Microsoft’s offer price of $95 per share. If the losses keep up, the market value of the company that makes video games was going to drop by almost $8 billion.

The gaming company also reported quarterly results on Wednesday, a day earlier than planned. Quarterly sales were better than expected, but that didn’t make investors feel much better about Britain’s decision.

Microsoft’s stock went up to its highest level in more than a year a day after the company, which makes Office software, beat Wall Street’s predictions for quarterly sales and profit.

In January 2022, the company made a move for Activision to give it more power in the video game market, which was led by Tencent and Sony.

Kirk Materne, an analyst at Evercore ISI, said in a note that he thought Microsoft would keep fighting this.

Microsoft's Activision Blizzard deal will hurt gamers, UK antitrust watchdog says | PBS NewsHour

He pointed out that if Microsoft gave up, it would have more than $60 billion in cash flow that it could give back to investors or use to spend in AI-related services.

The Competition and Markets Authority (CMA) has stopped many deals between tech companies, but the Activision deal is the biggest one. This is the latest sign that the UK watchdog is ready to take on Big Tech after blocking Facebook owner Meta’s purchase of Giphy in 2021.

By May 22, Europe will make a decision about the Activision deal. The Federal Trade Commission in the United States also wants to stop it.

Cloud Concerns

The CMA had been worried about how the deal would affect the market for video game consoles, which is led by Sony’s PlayStation. Last month, however, the CMA dropped its worries.

The last problem was cloud streaming services, which Microsoft tried to solve by making licensing deals with the owners of streaming platforms like Valve Corp, Nvidia, and Boosteroid.

It had already offered Sony, a vocal opponent of the deal, a 10-year “Call of Duty” license as part of a deal to bring the multi-billion dollar series to Nintendo’s Switch.

The CMA said that the world cloud gaming market was expected to be worth $13.7 billion in 2026.

“Cloud gaming is growing quickly and has the potential to change gaming,” said CMA panel chair Martin Coleman. “It could make people less reliant on expensive consoles and gaming PCs and give them more options for how and where they play games.”

“This means that protecting competition in this new and exciting market is very important.”

Xbox Game Pass is a subscription service for users of Microsoft’s Xbox system. PC Game Pass is a similar service for PC users.

The CMA said that Microsoft had between 60% and 70% of the world’s cloud gaming services and had competitive advantages like having Xbox, the Windows PC operating system, and the Azure cloud provider.

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