UK watchdog no longer thinks Microsoft’s Activision Blizzard merger is a threat to console competition (updated)

Cloud gaming is still a concern, however.

REUTERS/Dado Ruvic/

The UK is softening its objections to Microsoft's buyout of Activision Blizzard. The Competition and Markets Authority (CMA) has revised its findings and determined that the merger won't lead to significantly reduced competition in the console space. While the evidence remains the same, the watchdog now finds that Microsoft's ownership of franchises like Call of Duty would "not materially affect" Sony's ability to compete with PlayStation systems. Microsoft could "degrade" the PlayStation's appeal, the CMA says, but Sony's platform has a strong-enough catalog that the damage would be limited.

The Authority also reconsidered its view that Microsoft might benefit from shutting out Call of Duty's PlayStation audience. More recent Microsoft data suggests the company could suffer substantial losses in "any plausible scenario" by making the game franchise Xbox-only or offering exclusive perks, according to the CMA. Not enough gamers would switch from PlayStation to Xbox to make that strategy work, in other words.

The CMA makes clear that the updated findings don't change its concerns about cloud gaming services. In February, the regulator said Microsoft represented up to 70 percent of the worldwide cloud gaming market, and completing the Activision Blizzard purchase could harm gamers who can't afford an expensive console or PC.

We've asked Microsoft and Sony for comment. Activision Blizzard tells Engadget in a statement that the CMA now has an "improved understanding" of the console market, and that Microsoft already has solutions in place for remaining issues. Activision maintains that Sony is only trying to "protect its dominance" by contesting the acquisition.

Sony has long opposed the deal and calls it a "threat to our industry" that could hurt the quality of Call of Duty on PlayStation. Microsoft has made a number of concessions in hopes of clinching the Activision Blizzard takeover, including 10-year multi-platform promises for Call of Duty as well as arrangements to bring games to rival cloud platforms.

The UK overseer's change of heart doesn't overcome resistance to the merger in other countries. The US Federal Trade Commission is still suing to block the union, and points out that Microsoft made future titles like Redfall Xbox-exclusive on consoles despite assurances to European Union officials. Objectors can also comment on the findings before the end of March. However, the new stance still improves Microsoft's chances of completing the acquisition — a major regulatory body just dropped its main point of contention.

Update 3/24 4:10PM ET: Microsoft President Brad Smith says his company "appreciates" the CMA's review, and believes it "underscores a growing consensus" that the Activision Blizzard pact will create more competition.