Thank you for contacting me about the Competition and Markets Authority’s decision to prevent Microsoft’s proposed purchase of Activision.
My ministerial colleagues and I recognise that 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.
I am aware that Microsoft entered into a $68.7 billion deal to buy Activision, one of the most popular video games publishers in the world, in January 2022. The Competition and Markets Authority (CMA) launched an in-depth review of the deal in September 2022 and in February 2023 provisionally found that the merger could make Microsoft even stronger in cloud gaming, stifling competition in this growing market.
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 per cent 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 currently allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. I understand that 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. While I appreciate that you may be disappointed with this decision, I am informed that this was taken to protect innovation and choice in cloud gaming, which I know is important to the cloud gaming market.
I understand that Microsoft had sought to appeal against the CMA's decision, however this appeal has been paused following the CMA's announcement that it will consider an amended deal. The CMA has been clear that it will give "full and proper consideration" to Microsoft's proposals. I will certainly continue to follow any developments closely.
Thank you again for taking the time to contact me.