U.K. Blocks Microsoft's $69 Billion Bid for Activision, a Blow for Tech Deals

The United Kingdom has shot down Microsoft's $69 billion takeover bid for Activision, a major blow for the software giant's efforts to enter the gaming industry.

The U.K. government's decision is a huge win for video game publishers, who have long protested at Microsoft's attempt to muscle in on their business. It also represents a major blow to Microsoft, which had been in negotiations with Activision for several months. Microsoft is yet to make a statement regarding the news.

Why Video Game Publishers Opposed Microsoft's Bid

For decades, Microsoft's business practices have caused friction with the video game industry, and it's not been lost on the publishers who have the misfortune of having to deal with the company. In 2017, Microsoft made a massive move in the gaming industry by purchasing the video game publisher, Xbox Games Studios, for $10.16 billion. This was followed up by a $1.5 billion investment in another video game publisher, Atari, just last month.

The U.K. government's decision to block Microsoft's takeover of Activision is a win for gaming fans and enthusiasts, who will no longer be able to see their favorite video game companies firmly in the hands of a single corporation. It's also a win for game publishers, who will no longer have to worry about Microsoft trying to muscle in on their business and lowering their profit margins.

The U.K. government cited competition concerns as the main reason behind its decision to block the takeover. Activision is one of the largest video game publishers in the world, with hundreds of games under its belt and annual revenues of nearly $15 billion. It's also one of the most respected game publishers out there, with accolades including the Academy of Arts' Lifetime Achievement Award and the BAFTA Game Award for Outstanding Media Contribution.

The deal would have given Microsoft majority control of Activision, leading to some serious regulatory concerns. The UK government noted that the combined entity would have had a monopoly on the lucrative Xbox platform, which powers nearly all PCs and consoles in the country.

Microsoft's Console Wars

While its deal with Activision would have been a strategic move, putting it in the gaming industry, Microsoft has been a major player in the console wars ever since it purchased the game console developer, Xbox, in 2002. Indeed, if you compare the hardware alone, Microsoft's Xbox One is practically a replacement for a standalone computer, and it can be considered a superior product in every way.

In recent years, though, the company's focus has shifted to software and artificial intelligence, as well as consumer-focused initiatives such as Cortana and Bing. It's evident that the tech giant sees the PC as a platform for productivity rather than a place to play games.

The company purchased Minecraft in 2016 for $2.5 billion and made it its own staple product. Microsoft has also been actively seeking to purchase smaller game developers, seeing them as a valuable source of talent and innovation, and has invested heavily in AI and machine learning, creating products such as BizEaze and Xero, which provide entire businesses with online accounting. These are all positive developments for the company, but it seems that it wants to stay out of the hardware business.

Regulatory Concerns

The UK government's regulatory concerns were clearly outlined in a statement by Digital Minister Mitch Bethune:

"This is a decisive intervention by the U.K. government to stop a monopolistic takeover that would have created a monopoly in the UK and restricted consumer choice, particularly on xBox and PC games, whereas Microsoft has already proven itself to be a poor guardian of user privacy.

"From an anticompetitive standpoint, there is serious unease about the combination of Xbox and Activision as both businesses dominate their respective markets and would thus wield significant market power. The deal would also have seen an unprecedented combination of an online service (Microsoft Zune) and a game publisher (Activision).

"Conversely, there is a clear case to be made that consumers would have benefited from the increased competition that a combined Xbox and Activision would have delivered, in the form of better products, more innovation and a lower overall price. "

Xbox Vs. PC Gaming

The issue of where to play games is one that's been hotly contested for years, with Microsoft trying to muscle in on the market with its Xbox console and PC gamers opposing any collaboration between the two platforms. When it comes to raw power, the Xbox One is unquestionably the superior product of the two, combining a high-end CPU and GPU with a high-capacity hard drive, support for 4K resolution, and a custom-made controller, meaning users don't need to rely on a keyboard and mouse.

It's also worth considering that the PC is a more flexible platform, able to run a variety of games and applications, and can be used to create content, such as videos and music, as well as edit documents and spreadsheets.

It's fair to say that in recent years, PC gamers have gotten pretty good at gaming on the platform, with high-performance hardware becoming more affordable and accessible, resulting in a rise of amateur and professional competitive play.

Why Now?

So, why has now been chosen to propose the deal's blocking? Well, a combination of factors could play a role. Microsoft is seeking to enter the UK market with a bang, looking to close an $80 billion acquisition of office-based productivity tools, as well as make a splash in the gaming market, which it plans to make its own stronghold.

The timing is also significant, coming just a few months after UK Prime Minister, Theresa May, trumpeted the United Kingdom's intention to leave the EU, setting the country up for a possible ‘hard Brexit'. The country is also set to hold a referendum on June 23rd, asking its citizens whether or not they want to leave the EU.

“We must now ensure that the U.K. maintains its position as one of the greatest centers of technology and innovation, and remain a global leader in the fields of business and technology,” said Microsoft in a statement, promising to keep the Xbox and Zune studios in London and continuing to invest in the city.

The company's attempt to muscle in on the UK market and link up with a major corporation proved to be too much for the UK government, and it's a major blow for Microsoft, which was seeking to improve its gaming portfolio and gain a strategic foothold in one of the world's most exciting and important markets.