Wednesday saw the CMA strike the biggest blow yet to Microsoft’s attempts to acquire Activision Blizzard, blocking the deal due over worries of Microsoft effectively taking ownership of the growing cloud gaming market.
The move came as a shock to some analysts, with Parker Consulting’s Nick Parker telling Gamesindustry.biz “I was surprised at the CMA’s decision and would rather the UK had been a follower on this rather than the leader if Europe had been the bearer of bad news first.”
On the other hand other analysts suggested that the decision is reasonable, if we consider the future of games distribution.
"The games market is so dynamic it’s hard to predict a long-term outlook in terms of changes in distribution," said Ampere Analysis’ Piers Harding-Rolls. "Usage is growing though, partly driven by Microsoft’s investment in Game Pass Ultimate, infrastructure and service delivery, and Microsoft itself has been talking up its ability to reach billions of gamers using streaming distribution, so it’s somewhat understandable that the CMA would be focused in on this area of the market."
Does Microsoft have its head in the cloud?
With Microsoft’s repeated insistence that the prize that they're eyeing is Activision Blizzard’s strength on mobile platforms, and Sony’s repeated suggestions that the takeover could risk the availability of Call of Duty, the fact that cloud gaming has proven to be the breaking point is certainly interesting. And - rather than helping the industry - some analysts suggest that the move could instead prove to be a killer blow.
As reported by The Verge, Microsoft has guaranteed the availability of its cloud titles to consumers regardless of their chosen cloud service providers. In its proposed solution, submitted to the CMA, the company states: Microsoft will unilaterally grant a licence to any consumer who has purchased or obtained a free licence to play a PC Game from an authorised third-party PC digital storefront (“Eligible Game”) to stream the game using a generally-recognised PC consumer cloud gaming provider to a device they own (the “Consumer License”).
Many cloud service providers have struggled to offer a variety of games to subscribers. Google Stadia for example reportedly paid tens of millions for each individual game and the same complex licencing and clearing has Amazon's Luna service struggle. As such, rather than ensure healthy competition in the market, this decision could in fact result in its stagnation. And all the while Microsoft is likely to maintain its market dominance regardless, as developers and individual streaming services would need to negotiate terms for each game.
While Activision Blizzard could well launch its own cloud streaming service, it would be limited to subscribers, whereas Microsoft’s decision would let consumers access its games regardless of their service of choice.
The CMA states that Microsoft is in a unique position in terms of cloud service providers by not only having the relevant expertise but having a platform actively targeted by developers.
“For new entrants without an existing gaming console (including its games and operating system), we have found that this catalogue is most likely to come from games that are currently available on PC OS, as these can be streamed from any cloud gaming service that runs that OS (provided that adequate licensing arrangements are in place),” reads the CMA report. “As such, these cloud gaming service providers will either need a licence for a proprietary PC OS, such as for Windows, the OS for which most PC games are designed.”
Notably, the CMA homes in on Call of Duty, which has, rightfully or otherwise, become the key point of debate in popular discussion, as well as among legislators. The group states that the franchise “could make a material difference to the success of a cloud gaming provider”, which was a key reasoning in its decision to block the deal.
Despite the fact that Microsoft’s proposed remedy included guaranteeing the availability of Activision Blizzard’s titles on competing cloud platforms, it appears that the CMA were unconvinced that Microsoft would keep its word, stating that “the complexity of the remedy, in the context of a dynamic market that is evolving, also meant that it had a high risk of circumvention.”
So is the deal dead? Not quite. Microsoft intends to appeal the CMA’s decision and next week sees the EU reach its own decision regarding whether or not to approve the deal. Meanwhile in the US the FTC is also in the process of suing to block the deal. Should the EU decide to block the deal - meaning two hugely important territories have said 'no' - Microsoft may face the difficult decision of whether or not it should walk away from the table.
And where would this leave Microsoft’s mobile ambitions? The company has long maintained that Activision Blizzard subsidiary King was the primary factor in the acquisition. With King off the table and with Microsoft's mobile plans still in dire need of a kickstart, it may simply go on the hunt for an alternative target.
We listed Activision Blizzard as one of the top 50 mobile game makers of 2022.