The UK's Competition and Markets Authority (CMA) has granted preliminary approval for Microsoft's acquisition of Activision Blizzard, a deal valued at $69 billion. Initially, the CMA had reservations about the acquisition, primarily focusing on the potential impact on the cloud gaming market.
However, Microsoft's restructuring of the deal, which involves transferring cloud gaming rights for Activision Blizzard games to Ubisoft, has alleviated the CMA's concerns. The authority stated that the revised deal “substantially addresses” the issues raised, paving the way for the acquisition's potential final approval.
Addressing Competition Concerns
The restructuring of the deal is a significant move to ensure competition in the cloud gaming sector. The CMA had initially blocked the acquisition, citing fears of Microsoft dominating this emerging market.
The revised proposal sees the sale of cloud gaming rights outside Europe to Ubisoft, a French rival but also a Microsoft/Xbox Game Pass partner. Colin Raftery, the senior director of mergers at the CMA, emphasized that this new arrangement would maintain market structure and allow open competition to continue shaping the development of cloud gaming. The CMA is now in a consultation phase, seeking third-party feedback on the proposed remedies until October 6th, with a final decision anticipated before the extended deadline of October 18th.
Stakeholders' Optimism and Future Steps
Both Microsoft and Activision Blizzard have expressed optimism following the CMA's preliminary approval. Microsoft vice chair and president Brad Smith stated, “We presented solutions that we believe fully address the CMA's remaining concerns related to cloud game streaming,” and the company is working towards gaining final approval before the October deadline. Activision Blizzard CEO Bobby Kotick sees this development as a significant milestone and remains optimistic about the merger's completion. The UK is the final regulatory hurdle for this acquisition, and if cleared, it will mark the conclusion of one of the largest tech deals in history.
Official Statements and Further Consultations
The official announcement from the CMA highlighted that the restructured deal is substantially different from the original transaction and addresses most of the concerns. The sale of Activision's cloud streaming rights to Ubisoft is a pivotal element in preventing the content from coming under Microsoft's control, thereby maintaining competition. However, the CMA has identified limited residual concerns, which Microsoft aims to address by offering remedies enforceable by the CMA. Sarah Cardell, CEO of the CMA, expressed that it would have been preferable if Microsoft had proposed this restructure earlier in the investigation, emphasizing the importance of preserving competition, innovation, and choice in cloud gaming. The CMA continues to consult on Microsoft's proposed remedies, with the consultation period remaining open until October 6th.
A Long Road to Approval
In April, the UK regulator provisionally blocked on competition grounds. According to The Verge Microsoft has filed a new document with the CMA, highlighting some recent developments that could affect the regulator's assessment of the deal.
Call of Duty is the crown jewel of Activision, the most lucrative and popular franchise in the gaming industry. Activision also owns other hit games like Candy Crush, Diablo, and Warcraft, but none of them can match the appeal of Call of Duty, which attracts millions of players across platforms.
Microsoft knows this, and has promised to keep Call of Duty accessible to everyone, not just Xbox and PC gamers. It has signed 10-year contracts with cloud gaming services like Boosteroid, mobile operators like EE in the UK, and even Nintendo. But Sony has been stubborn, refusing to cooperate with Microsoft and lobbying regulators to block the merger. Sony has accused Microsoft of plotting to ruin Call of Duty on PlayStation, a game that Sony has confessed is “irreplaceable”.
But Sony's resistance was futile, as a US court dismissed the FTC's case against Microsoft and Activision, clearing the way for the merger to go ahead. Sony had no choice but to make peace with Microsoft and secure a deal for Call of Duty on PlayStation. The FTC did appeal the decision by that appeal was overturned earlier this month.