While the Microsoft’s acquisition of Activision-Blizzard just got approved in South Africa, it seems a major roadblock has been put in front of it, as the UK’s CMA (Competition and Markets Authority) has announced today that they have blocked the acquistion.

According to the CMA, the deal has been blocked over concerns that it would affect the future of the cloud gaming market, thus leading to reduced innovation and less choice for UK gamers.

Per the report, it states Microsoft already accounts for an estimated 60-70% of the global cloud gaming services, and also cites “important strengths” such as owning Xbox, and the cloud computing infrastructure Azure and Xbox Cloud Gaming.

Here’s an excerpt from the report by the CMA explaining their decision:

Cloud gaming concerns

The UK cloud gaming market is growing fast. Monthly active users in the UK more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to £11 billion globally and £1 billion in the UK by 2026. By way of comparison, sales of recorded music in the UK in 2021 amounted to £1.1billion.

Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.

Microsoft already accounts for an estimated 60-70% of global cloud gaming services and 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 deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.

In addition to that, Martin Coleman, chair of the independent panel of experts conducting the investigation added:

• Gaming is the UK’s largest entertainment sector. Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market.
• Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors.
• Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.
• Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.

Over on Twitter, Microsoft President and Vice Chairman Brad Smith posted a response to it, and states that while they are disappointed with the decision, they will file an appeal.

We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ

— Brad Smith (@BradSmi) April 26, 2023

Note that the FTC (Federal Trade Commission) has not yet handed their verdict in, but just a few months ago, the governing body has said that they are seeking to block the acquisition.

We’ll have more info on this as it develops.