Microsoft is revising its proposed acquisition of Activision Blizzard to address concerns raised by the UK's Competition and Markets Authority (CMA). The tech giant plans to transfer cloud gaming rights for all current and future Activision Blizzard games to Ubisoft, a leading global game publisher. This move is in response to the CMA's apprehensions about the potential impact of the $68.7 billion deal on cloud gaming competition. The revised proposal has initiated a new regulatory investigation in the UK, which could extend until October 18th.
Ubisoft's Role in the Deal
Under the restructured agreement, Ubisoft would obtain the cloud streaming rights for all current and upcoming Activision Blizzard PC and console games for the next 15 years. This means Microsoft, upon finalizing its acquisition, will not have the authority to release Activision Blizzard games exclusively on Xbox Cloud Gaming. Furthermore, Microsoft will not be able to exclusively dictate the licensing terms of Activision Blizzard games on competing services. Instead, Ubisoft will manage the streaming rights for Activision Blizzard games outside the EU and will license titles back to Microsoft for inclusion in Xbox Cloud Gaming. Ubisoft will also incorporate Activision Blizzard games into its Ubisoft Plus Multi Access subscription, available on platforms like PC, Xbox, Amazon Luna, and PlayStation via Ubisoft Plus Classics.
Financial Aspects and Licensing
Ubisoft would compensate Microsoft for the cloud streaming rights to Activision Blizzard's games through a one-time payment and a market-based wholesale pricing mechanism. This mechanism includes an option that supports pricing based on usage. Additionally, Ubisoft would have the opportunity to offer Activision Blizzard games to cloud gaming services that operate on non-Windows operating systems.
Regulatory Hurdles and Future Implications
The CMA had initially blocked Microsoft's deal in April due to concerns about its potential impact on the cloud gaming market. However, following negotiations and the Federal Trade Commission's (FTC) loss in a US federal court, the CMA has embarked on a new investigation phase. The CMA has set a deadline of October 18th for its decision, aligning with Microsoft's extended deal closing date with Activision. The CMA has also imposed a final order on Microsoft's original deal, barring it globally as the new restructuring is investigated. The revised transaction would not affect Microsoft's commitments to the European Commission. Microsoft has secured several cloud gaming deals, and EU regulators have approved the Activision Blizzard deal, granting a free license to consumers in EU countries. This license allows them to stream via any cloud game streaming service of their choice, all current and future Activision Blizzard PC and console games they possess a license for.
Brad Smith, Microsoft's president, emphasized the company's commitment to addressing the CMA's concerns and ensuring the acquisition benefits players, developers, and the industry. On the other hand, Ubisoft's official announcement highlighted the addition of popular titles like Call of Duty to its platform and the potential for players to access a broader range of games through cloud streaming.
The CMA's chief executive, Sarah Cardell, stated that the new deal does not guarantee approval. The CMA will thoroughly assess the restructured deal's details and its potential impact on competition. The primary goal remains to ensure that the burgeoning cloud gaming market continues to benefit from open and effective competition, fostering innovation and choice for consumers.
Getting the Deal Over the Line Around the World
Microsoft's proposed acquisition of Activision Blizzard recently received major approval from South Africa's Competition Tribunal, adding to a series of regulatory approvals that Microsoft has received for the deal. In May, the European Commission and China's competition regulator both cleared the deal. However, the UK's Competition and Market Authority (CMA) rejected the deal, leading Microsoft to consider bypassing the UK order and pressing ahead with the deal, or alternatively, withdrawing Activision from the UK market.
In the midst of the acquisition process, Activision Blizzard has faced its own legal challenges. The company has recently settled a lawsuit with the Department of Justice over accusations of financially punishing Call of Duty and Overwatch esports teams through a “Competitive Balance Tax”. The settlement requires Activision Blizzard to refrain from putting any caps or limits on salaries of esports players or teams.
Despite the ongoing antitrust scrutiny, Microsoft has received “unconditional approval” from China for its plan to acquire Activision Blizzard. This clearance has added complexity given the requirement in mainland China for game-makers to work with a Chinese publisher for releasing titles in the country. Popular Activision Blizzard franchises such as World of Warcraft, the StarCraft series, Overwatch, and Diablo have been suspended earlier this year due to a disagreement between Activision subsidiary Blizzard Entertainment and its Chinese partner, NetEase.