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According to Agence France-Presse in London, the British Competition and Markets Authority (CMA) officially rejected Microsoft’s acquisition of Activision Riot today, citing concerns that the acquisition would change the future of the current fast-growing cloud gaming market, leading to Less innovation and options for UK players. Microsoft and Activision Blizzard said they would continue to appeal. After the news came out, Activision Blizzard’s U.S. stock fell more than 10% before the market.
It is reported that this transaction is the largest transaction in Microsoft’s history.
Jefferies analyst Brend Thill said: “Before the game business, there are higher priorities such as cloud computing and AI.” He said that large institutional investors currently rarely mention Microsoft’s game business, so they are interested in Activision Blizzard. Acquisitions have become “optional, not necessary”.
Sources close to the companies insist that both Microsoft and Activision Blizzard will appeal the UK regulator’s decision. However, given that the U.S. Federal Trade Commission (FTC) has already moved to block the deal, and the European Union has yet to disclose its position on the deal, Microsoft’s appeal is unlikely to succeed.
Microsoft’s acquisition of Activision Blizzard would have been the largest deal in the history of the gaming industry. Before the CMA blocked the deal, the companies repeatedly said there were mistakes and misunderstandings in the regulator’s process, and even issued unusually fierce public rebukes.
In February, British regulators suffered an embarrassing blunder. At the time, Microsoft pointed to an apparent error in the CMA’s analysis.
An analysis by antitrust officials has concluded that Microsoft will push Activision Blizzard’s hit “Call of Duty” game into an Xbox exclusive, a blow to rival Sony. According to Microsoft, the antitrust officials’ analysis was based on Sony’s PlayStation earnings expectations for five years after losing the game, but factored those possible losses into one year, skewing the results significantly.
A month later, the CMA revised its analysis to remove concerns about the gaming console market, and Microsoft seemed to be vindicated. But while Microsoft and Activision Blizzard believe they have cleared the biggest regulatory hurdle, they still underestimate the importance of what was previously considered a “secondary issue.”
At present, the CMA is becoming more and more tough on the potential problems of the cloud gaming market.
Microsoft previously described the acquisition as a victory for consumers. Although Activision Blizzard CEO Bobby Kotick (Bobby Kotick) has not yet provided cloud gaming services and is skeptical, Microsoft said it hopes that games will be clouded to provide consumers with more diverse choices.
One day in the future, cloud games may play an important role in the game industry, and CMA is worried that Microsoft will monopolize it. The panel determined that Microsoft had a commercial incentive to use games like Call of Duty to cement its hold on the nascent cloud gaming market without licensing those games to rival platforms.
A lawyer with knowledge of the review process said the CMA “heard the evidence politely in the room, but they didn’t believe it”. The CMA’s judgment means that there is a dispute between the two parties as to whether this transaction will monopolize the emerging market of cloud games.
According to the CMA, Microsoft’s share of the global cloud gaming market has exceeded 60%. In response, Microsoft President Brad Smith (Brad Smith) retorted that “the CMA’s understanding of this market and how related cloud computing technologies actually work is flawed.”
Microsoft said that although Microsoft Game Pass can be accessed through the cloud platform, most users will only use the game download service, and only very few users pay to use the real cloud game service.
Although there are predictions that cloud gaming will become the mainstream of the game industry in the long run, just like the rise of streaming media, the development of pure cloud gaming platforms is currently very slow. Google shut down its once-ambitious Stadia cloud gaming project last year, and Amazon’s Luna platform hasn’t attracted many users.
Joost Rietveld, a former executive in the game industry and an associate professor at the University College London School of Management, said that given the lack of a killer application for the cloud gaming model, it is currently difficult to attract players. Most hardcore gamers prefer a powerful gaming console or gaming PC.
Uncertainty in the cloud gaming market has become one of the biggest obstacles facing Microsoft. Microsoft said that licensing agreements signed with companies such as Nvidia show that Microsoft is willing to support full competition in the cloud computing market. But Rietveld said that these services are not comprehensive cloud computing platforms, so it is difficult to use them as indicators to observe the final evolution direction of the market. The CMA also said on Wednesday that it is difficult to use Microsoft’s current cloud computing cooperation agreement as the basis for measuring the deal.
On Wall Street, the U.K. regulator’s intervention appeared to underscore another new reality for big tech companies. Jefferies analyst Thill believes that this is by far the most obvious sign that regulators are now determined to prevent large technology companies from entering new markets through large-scale mergers and acquisitions. Therefore, this action “affects all technology companies.”
Manuscript source: Comprehensive Tencent, Sina
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