UK regulator ‘concerned’ by Microsoft-Activision merger

polygon.com:

The U.K.’s competition regulator, the Competition and Markets Authority, has decided that Microsoft’s $70 billion acquisition of Activision Blizzard may harm competition in the video games market, and that it merits deeper investigation.

Concluding its Phase 1 investigation, the CMA clearly outlined its concerns that the deal could harm competition, not just in the market for games consoles, but in the younger markets for cloud gaming and subscription services that Microsoft has taken an early lead in. The CMA will move to a more penetrating Phase 2 investigation, unless Microsoft and Activision Blizzard provide an undertaking, within the next week, proving that there’s no risk to competition in the UK.

The CMA highlighted “a realistic prospect of a substantial lessening of competition [...] in gaming consoles, multi-game subscription services, and cloud gaming services.”

The regulator looked at the potential impact of the merger on competition between Microsoft, Sony, and Nintendo in the console market. It highlighted the risk to Sony in particular of Microsoft owning “some of the world’s best-selling and most recognisable franchises, including Call of Duty, World of Warcraft, and Candy Crush.”

But the CMA also noted that the gaming industry is in a “transitional phase” with the advent of cloud gaming, and subscription services like Xbox Game Pass. These, it believes, offer a “window of opportunity for new entrants” that doesn’t exist in the console space. It stresses the strength of the “gaming ecosystem” Microsoft already has: consoles, a subscription service, a cloud gaming service, its own cloud platform (Azure) and a ubiquitous PC operating system (Windows), as well as 24 game development studios.

The CMA’s concern