What you need to know
- Microsoft President Brad Smith represented Microsoft’s legal position during the court battle.
- During Microsoft’s acquisition of Activision, the British regulator was very insistent on getting the deal done.
- At the time, Brad Smith said some of the UK’s regulatory decisions represented “dark days” for Microsoft’s business in the UK and said the UK was “closed for business”.
- In a new interview, Brad Smith now believes the British regulator acted “fairly”.
Microsoft’s massive Activision-Blizzard litigation battles largely dominated the gaming airwaves last year as Microsoft battled for regulatory approval with the European Union, the US Federal Trade Commission and Britain’s capital markets regulator. The European Union agreed to the takeover while enforcing legal restrictions on cloud gaming provisions, while the UK did so after forcing Microsoft to license cloud gaming rights to Ubisoft to maintain competition. However, the US Federal Trade Commission (FTC) is fighting in court to reverse the takeover after failing to get an injunction against Microsoft over the summer to complete the deal.
With the vast majority of global regulators agreeing or abstaining from voting, Microsoft finally completed its deal to buy Activision-Blizzard last October. The deal frees developers of games like Call of Duty and World of Warcraft from Bobby Kotick’s system, as the former CEO left the company just two days ago. Current and former developers have shared stories about Kotick’s tenure at Activision, including how Kotick once threatened to “kill an employee” during an outburst he later described as “over the top.” In fact, most shareholders, developers and even Activision customers are optimistic about the company’s future under Microsoft, which is why it was surprising how difficult it was for Microsoft to get the deal through the UK regulator.
The United Kingdom was particularly adamant about the takeover, appearing reluctant to take PlayStation’s arguments seriously at hearings and negotiations. Sony’s status as the “standard” console appeared to be an advantage in early negotiations, but greater scrutiny led CMA to change tactics. It will no longer be competing in console gaming, but cloud gaming, a market that doesn’t exist yet and will likely require investment from the big cloud players to have any chance.
However, both the UK and the EU can envision a world where Microsoft can eventually dominate the entire digitally settled gaming landscape. Competition between streaming services such as Netflix and Disney+ has led to industry-wide strikes in the US, with actors and writers demanding better pay and conditions. Netflix and others have also raised prices more arbitrarily and faster than Microsoft’s similarly regulated Xbox Game Pass.
Brad Smith now believes the UK capital markets regulator has been “fair”.
It is undeniable that industry consolidation can lead to less competition, which can lead to higher prices for consumers and weaker protections for workers. The European Union and the United Kingdom have forced Microsoft to give up some rights to cloud streaming versions of its games. The EU forced Microsoft to give other cloud providers such as Boostroid and NVIDIA GeForce Now public access to its games, while the UK forced Microsoft to go a step further and take away licenses from other companies entirely (which Ubisoft won).
During early discussions, long before the above solutions were found, Microsoft President Brad Smith criticized the UK Capital Markets Authority and the UK legal framework in general. Smith described the UK as “closed for business” and noted that the struggles represented some of Microsoft’s “darkest days” in the UK.
The comments could be problematic for the British government, which is trying to portray itself as “business-friendly” and seeking US investment in a post-Brexit recession. The UK CMA regulator is independent of the UK parliamentary structure and has therefore been criticized by some British MPs, who have concluded that the regulator looks at the whole economy rather than ideology. There are even allegations that the UK regulator is colluding with the US Federal Trade Commission, which has so far repeatedly failed to provide evidence of how Microsoft may be trying to distort competition in markets dominated by its foreign rivals, such as Tencent, Chinese and Microsoft. Japanese Sony. Indeed, Smith’s recent comments may be aimed at softening the ongoing arguments of the US Federal Trade Commission as it continues to fight the deal even after Microsoft shuts down.
In an interview with Dr BBCBrad Smith, who heads Microsoft’s legal department, said the UK CMA was “tough but fair”. Smith continued: “I think the CMA has maintained its own identity while still providing a practical avenue for innovation and investment. I think it’s good for everybody.”
Smith also discussed Microsoft’s £2.5 billion ($3.16 billion) investment in UK cloud infrastructure and artificial intelligence in collaboration with the UK government. “The UK government has been bolder than any other government in the world by 2023, pledging £900 million to build… [AI] Infrastructure for researchers in the UK.” The deal was announced just weeks after Microsoft completed its Activision-Blizzard acquisition, which saw Microsoft “double” its data center space in the UK and provide funding to train and develop AI research on the given land. Microsoft is aiming to create 20,000 UK jobs in the London and Cardiff area, with potential to expand north into areas that urgently need investment.
happy ending (?)
While the drama between the UK CMA and Microsoft may be over (for now), Microsoft is still facing an investigation into its Microsoft Teams work tool practices, which Slack and others are calling “anti-competitive”. The EU could demand exemptions from Microsoft regarding its designation as a “gatekeeper” company, although Microsoft would likely benefit here as well, as the same law would force Apple and Google to open up their mobile platforms to sideloading and third-party apps. . shop. Microsoft’s grand strategy for Activision-Blizzard was, after all, to build a competitive mobile gaming store for iOS and Android, and that investment will likely pay off in 2024.
However, in the end it all just works. Microsoft still faces another court battle with the FTC over Activision, and the UK CMA could try to use the franchises as an example of its willingness to find solutions that benefit as many gamers as possible. The FTC may lack the legislative powers of the UK capital markets regulator and the European Commission when it comes to regulating competition, but it has done itself a disservice by making bad faith arguments that fail even the vaguest of scrutiny.
For Activision developers and customers, we hope that the new Xbox era will result in a healthier work environment for these teams and a renewed focus on players rather than shareholders.
When it comes to job creation in the UK through Microsoft’s major cloud investment, as a Brit I say we need all the help we can get. Let’s build a big, beautiful data center in the north too, shall we?
