Microsoft’s Metaverse Push Blocked by UK Officials

Today, the UK Competition and Markets Authority (CMA) blocked Microsoft’s $69 billion acquisition of Activision Blizzard, which provides the “building blocks” for its Metaverse. Microsoft first announced its acquisition in 2022. At the time, Satya Nadella, Chairman and Chief Executive of Microsoft, said that the gaming industry plays a “key role in the development of Metaverse platforms.”

Moreover, the purchase marks Microsoft’s attempt to expand Activision Blizzard’s gaming business operations across PCs, mobiles, consoles, and the cloud. Although, the CMA is blocking the deal because the group believes it represents a competition concern within the cloud gaming marketplace.

According to the CMA, by purchasing Activision Blizzard, Microsoft could stifle competition by exclusively releasing popular titles such as Call of Duty on its Games Pass digital application storefront.

Speaking on the matter, the CMA noted that the purchase allows Microsoft to take a “strong position” in a rapidly growing cloud gaming market. The CMA also says the move risks “undermining the innovation” crucial to developing cloud gaming market opportunities.

Moreover, the GMA added:

Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market.

Microsoft’s Response

Conversely, Microsoft is trying to resolve competition concerns by ensuring that the cross-distribution of gaming applications benefits the firm and negates exclusivity options. Additionally, Microsoft is offering rival publishers Sony, Nintendo, and Nvidia a 10-year agreement to keep Call of Duty on each firm’s respective storefront to calm concerns.

Microsoft Vice Chair and President Brad Smith noted that his firm is “committed” to appealing the acquisition blocker.

Smith said the CMA’s decision “rejects a pragmatic path to address competition concerns,” instead, Smith believes that the block “discourages technology innovation and investment in the United Kingdom.”

Smith also added:

We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.

On the Activision Blizzard side, Bobby Kotick, CEO, added that the firm is also working to appeal the CMA’s decision explaining that the “deal is good for competition.”

Moreover, Kotick noted:

If the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.

But What does this Mean for the Metaverse?

While the CMA blockade represents concern over the gaming market, but what does it mean for the Metaverse?

The gaming and Metaverse, talent and resource pool overlap significantly, with the Activision Blizzard purchase providing comprehensive resources for high-quality Microsoft-made immersive experiences.

Satya Nadella, Chairman and Chief Executive of Microsoft, noted:

Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.

Moreover, the deal represents Microsoft’s heavy investment into high-quality content, community, and cloud opportunities to develop safe, inclusive, and accessible gaming platforms.

Phil Spencer, the CEO of Microsoft Gaming, also said the purchase allows the firm to “build a future” where gamers could play their favourite titles “virtually anywhere they want.”

Furthermore, mirroring his recent comments, Bobby Kotick said at the time that the merger helps “ensure our continued success in an increasingly competitive industry.”

More on Microsoft’s Immersive Journey

Microsoft is also working on other enterprise-facing immersive solutions.

On top of its Hololens MR headset. Microsoft is also taking steps to establish its Mesh solution as an immersive software tool for businesses. In March, Microsoft diverted resources into Mesh from its Altspace VR Metaverse development team following its dissolution.

Since Microsoft has integrated immersive tools into its preexisting workplace suites, Microsoft introduced a preview version of its immersive avatars for Teams in March. The service provides improved dial-in flexibility and prevents remote working challenges such as video call fatigue by providing immersive options which keep workers engaged without forcing them to appear on camera.

Additionally, Microsoft is actively supporting Dynamics 365 Guides and Suite for its Hololens portfolio and Meta’s Quest line-up.