In a surprising move, the UK’s Competition and Markets Authority (CMA) has halted Microsoft’s $68.7 billion acquisition of video game giant Activision Blizzard. The deal would have given Microsoft control over popular titles like Call of Duty and Candy Crush. The CMA expressed concerns about reduced innovation and limited choices for gamers in the fast-growing cloud gaming industry.
Microsoft and Activision criticized the decision and plan to appeal, arguing that the CMA’s stance contradicts the UK’s ambitions to become a technology business hub. The acquisition needs approval from regulators in the UK, US, and European Union. The CMA’s ruling could jeopardize the entire takeover process.
The CMA found no competition issues in console gaming, but focused on potential risks to the emerging cloud gaming market. Despite Microsoft’s proposed plans to address the CMA’s concerns, the regulator found the measures inadequate. This decision is a game-changer, as Microsoft aimed to strengthen its position in the future gaming market. With the acquisition on hold, Microsoft must now make additional concessions to move forward.
As the gaming world evolves toward a Netflix-like model, the fate of Microsoft’s ambitious acquisition remains uncertain, and with them being such a major player, as does the future of the industry itself.
THINK LIKE AN ECONOMIST!
Q1. Define the term merger.
Q2. Explain how the acquisition of Activision Blizzard by Microsoft could impact competition in the cloud gaming market.
Q3. Draw a demand and supply diagram to illustrate the effect of reduced competition in the cloud gaming market on the price and quantity of games available.
Q4. Discuss the potential benefits and drawbacks of allowing the Microsoft-Activision Blizzard merger to proceed for both gamers and the gaming industry as a whole.
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