The Competition and Markets Authority has said Activision may have to sell its Call of Duty franchise if Microsoft’s $68.7bn acquisition goes ahead.
Its provisional ruling on the deal said that it could result in higher prices, fewer choices and less innovation for UK gamers.
Microsoft made the all-cash offer in January last year, which would be the biggest ever takeover in the tech and gaming sector, with titles including CoD, World of Warcraft and Candy Crush. Activision has one of its UK offices based in Warrington.
However, the UK’s CMA has raised a number of concerns about cloud and console gaming.
It stated that the growth in cloud gaming could “stifle” competition in the growing market, “harming UK gamers who cannot afford expensive consoles.”
The report also said that UK gamers could be harmed by weakening the rivalry between Xbox and PlayStation gaming consoles.
The findings come after 5 months of research to understand the market and impact, including site visits, hearings and analysing more than 3m internal documents from the 2 businesses.
“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 (or only available on other services under materially worse conditions),” it reads.
“Microsoft already accounts for an estimated 60-70% of global cloud gaming services and also has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).
“The CMA provisionally found that buying one of the world’s most important game publishers would reinforce this strong position and substantially reduce the competition that Microsoft would otherwise face in the cloud gaming market in the UK. This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC.”
It found that a number of key games, including CoD indicated that “Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own consoles (or only available on PlayStation under materially worse conditions). The CMA’s provisional findings note that this strategy, of buying gaming studios and making their content exclusive to Microsoft’s platforms, has been used by Microsoft following several previous acquisitions of games studios.”
“It’s been estimated that there are around 45 million gamers in the UK, and people in the UK spend more on gaming than any other form of entertainment including music, movies, TV, and books. Strong competition between Xbox and PlayStation has defined the console gaming market over the last 20 years. Exciting new developments in cloud gaming are giving gamers even more choice,” said Martin Coleman, Chair of the independent panel of experts conducting this Phase 2 investigation.
“Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here.
“We have also today sent the companies an explanation of how our concerns might be resolved, inviting their views and any alternative proposals they wish to submit.”
At this stage, some of the remedies suggested by the CMA are a “partial divestiture of Activision Blizzard, Inc” and all the business of CoD; and prohibition of the merger.
It is now awaiting responses with its final report due by April 26th.