Cognition Dissemination: Is the Activision/Xbox Merger Really in Danger?

There was little reason to doubt that Microsoft’s/Xbox’s purchase of Activision Blizzard would go through, despite being one of the largest and most consequential company acquisitions in video gaming history. Big mergers receive plenty of deserved scrutiny, but it’s harder to find examples of those which have been scuttled compared to the massive number of them that were completed regardless. This was bound to have the same fate.

That hasn’t stopped it from facing a series of twists in the last couple of months. The biggest came in how the United Kingdom’s Competition and Markets Authority (CMA) blocked the deal, citing concerns about Xbox eroding the remaining cloud gaming market following the merger. It was partly considered a twist because every other gaming company merger, including previous ones initiated by Microsoft’s Xbox division, have been approved, though this one is easily the largest yet. The other twist-related reason involved the number of so-called insiders with supposed sources close to the CMA who heard that it would be approved, only for the organization to release a statement showing otherwise. It was the latest battering to the credibility of analysts and insiders who figured that nothing was stopping this deal.

It’s also worth calling a “twist” because while there was always a chance of the CMA blocking it, the potential impact to the cloud gaming circle wasn’t predicted to be the reason. A portion of the gaming audience, particularly those who know how bad mergers can be for the audience and don’t primarily game on Xbox platforms, figured this would happen because of the impact it will undoubtedly have on the competing PlayStation and, to a lesser extent, Nintendo software ecosystems. Microsoft has been doing everything they can to convince watchdog groups that Activision’s games, Call of Duty chief among them, would stay multiplatform for years to come. But Sony gave every indication that they weren’t convinced. It’s clear that they feel good about this decision, even though that wasn’t the stated reason for the block.

Chances are, funnily enough, that the collapse of Google’s Stadia might have influenced the CMA’s decision. Stadia was bound to fail considering how ill-prepared the market was for cloud gaming, the high software prices (comparable to, if not higher, than those on other platforms), and Google’s history with killing services quickly. The only other key competitor in the cloud gaming space is Amazon’s Luna, though whether that ultimately attracts a portion of the market that Stadia didn’t is a question only time will answer.

Microsoft is in the process of appealing the decision to a higher UK authority, but the wait for another decision will take months — perhaps even up to a year. There is now no way this merger can be completed by the initially-confirmed timeframe of late-June, a month-and-a-half from now.

The question of whether Microsoft will consider this entire affair to be no longer worth it looms as other watchdog groups around the world will continue scrutinizing it. It’s certainly in their favor that the European Union’s regulatory commission approved of the deal mere weeks after the CMA blocked it. Regulators in China, South Korea, Australia, and New Zealand are still looking over it.

Beyond the UK, the biggest obstacle to climb will be with the Federal Trade Commission (FTC) in the United States. The Biden administration’s FTC has actually been doing something worth a damn, contrary to the hobbled organization that favored every merger that didn’t criticize Dear Leader under the Trump Administration. The FTC previously provided a press release in early December saying that it would seek to block the deal because it would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.” Unless they’ve had a change of heart, which is unlikely, they’ll announce a formal blocking of it any day now.

These are notable setbacks, yet there remains a solid chance that the deal will ultimately go through. The CMA and potentially the FTC are doing their job by potentially delaying the deal for justifiable reasons regarding the increased number of console exclusives Microsoft could soon have. But higher courts tend to favor corporate deals and mergers, especially in the United States, so there’s a good chance of them allowing it. It will simply take far longer than Microsoft and Activision planned.

This means that Xbox competitors, Sony key among them, should continue making preparations for this to happen. This, perhaps, is the time for them to continue researching, and potentially green light, some kind of Call of Duty competitor for the time when they lose access to the franchise. Modern video games take a long time to make and require large resources, after all. In the meantime, Sony will stave this off for as long as they can.

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Cognition Dissemination: Microsoft Should Have Taken Japan More Seriously Cognition Dissemination: Microsoft’s Already-Confusing Series X Cognition Dissemination: Google Stadia, and the Beginning of the Video Game Streaming Wars Cognition Dissemination: It’s No Surprise That Game Pass Is Cannibalizing Sales