UK regulator now says Call of Duty exclusivity would be "significantly loss-making" for Microsoft

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Original story: The Competition and Markets Authority, the UK regulator investigating Microsoft's proposed acquisition of Activision Blizzard, has changed its stance on the impact the deal would have on competition in the console space – as well as the likelihood of Xbox making Call of Duty exclusive to its system.

The organisation has updated its provisional findings, originally released in February, based on "a significant amount of new evidence" that emerged in a consultation period with interested parties.

According to a statement, the CMA inquiry group has "reached the provisional conclusion that, overall, the transaction will not result in a substantial lessening of competition in relation to console gaming in the UK."

The most significant change is the view on whether Microsoft has financial incentive to make Activision's games, including Call of Duty, exclusive to the Xbox ecosystem.

"While the CMA's original analysis indicated that this strategy would be profitable under most scenarios, new data – which provides better insight into the actual purchasing behaviour of CoD gamers – indicates that this strategy would be significantly loss-making under any plausible scenario," the statement reads.

"On this basis, the updated analysis now shows that it would not be commercially beneficial to Microsoft to make CoD exclusive to Xbox following the deal, but that Microsoft will instead still have the incentive to continue to make the game available on PlayStation."

However, the CMA emphasised that its concerns about the potential lessening of competition in the cloud gaming space still stand, something the regulator will continue to consider as it prepares to make its final decision on April 26.

Microsoft has been attempting to address these via ten-year deals to bring Xbox games (including Activision titles if the deal goes through) to multiple cloud services, including Nvidia GeForce Now, Boosteroid and Ubitus.

"Provisional findings are a key aspect of the merger process and are explicitly designed to give the businesses involved, and any interested third parties, the chance to respond with new evidence before we make a final decision," said Martin Coleman, chair of the independent panel of experts conducting this investigation.

"Having considered the additional evidence provided, we have now provisionally concluded that the merger will not result in a substantial lessening of competition in console gaming services because the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action.

"Our provisional view that this deal raises concerns in the cloud gaming market is not affected by today’s announcement. Our investigation remains on course for completion by the end of April."

The Microsoft-Activision acquisition still faces scrutiny from EU regulators, who have pushed back their final decision to May 22.

Update: Activision Blizzard has since issued a statement to GamesIndustry.biz, reacting to the CMA's change in stance.

"The CMA's updated provisional findings show an improved understanding of the console gaming market and demonstrate a commitment to supporting players and competition," the company said.

"Sony's campaign to protect its dominance by blocking our merger can't overcome the facts, and Microsoft has already presented effective and enforceable remedies to address each of the CMA's remaining concerns. We know this deal will benefit competition, innovation, and consumers in the UK."

Update 2: A Microsoft spokesperson added: “We appreciate the CMA’s rigorous and thorough evaluation of the evidence and welcome its updated provisional findings. This deal will provide more players with more choice in how they play Call of Duty and their favourite games. We look forward to working with the CMA to resolve any outstanding concerns."