Microsoft Retools Activision Deal in New Submission to UK Regulator

Dan Meier 22 August, 2023 

Microsoft’s takeover of Activision Blizzard could respawn in the UK after the tech giant submitted new proposals for its the terms of its acquisition. Today the UK’s Competition and Markets Authority (CMA) announced a new investigation into the deal, after blocking the merger in April.

Since then, the acquisition has been approved in the US and EU, which Microsoft claims has rendered the initial decision inappropriate. The company has also negotiated new licensing deals, including a key agreement with Sony, aimed to alleviate regulators’ antitrust concerns.

In July, the acquisition was approved by a US judge, prompting the CMA to reconsider proposals from Microsoft to address its concerns. But upon review, the watchdog finalised its decision, issuing a Final Order that prohibits the original deal on a worldwide basis.

Separately, Microsoft and Activision have submitted a new deal to the UK regulator, triggering a fresh Phase 1 investigation by the CMA. The restructured terms stipulate that Microsoft will not acquire the cloud streaming rights to any Activision game released in the next 15 years.

Off and on again

This condition could prove crucial as cloud gaming was the key concern in the CMA’s original decision. The authority found that Microsoft accounts for an estimated 60-70 percent of global cloud gaming services, and the acquisition of Activision (which owns Call of Duty and World of Warcraft) would reinforce its advantage.

As a result of market conditions and Microsoft’s dominant position, the CMA ruled that the $68.7 billion takeover would harm competition in the cloud gaming market. The ruling noted that Microsoft would be financially incentivised to make Activision’s games exclusive to its own cloud gaming service, effectively blocking PlayStation users’ access to Call of Duty.

The new proposals seek to remedy those concerns by excluding cloud rights for any existing and future Activision PC and console games. Under the restructured deal, these rights will be divested to French games company Ubisoft, prior to Microsoft’s acquisition of Activision.

The move is intended to enable a third-party publisher to supply Activision games to all cloud gaming service providers, including Microsoft. Ubisoft will also be able to compel Microsoft to provide versions of its games on operating systems other than Windows. This means Ubisoft can license out Activision content under different business models, including subscription services.

Last month, the company also signed a 10-year deal with Sony which ensures Call of Duty remains on PlayStation after completion of the merger. However this was deemed insufficient to assuage the CMA’s concerns under the terms of the initial deal.

Roads to Victory

With this new submission, Microsoft and Activision hope to secure the regulatory approval already granted by the European Commission and US courts. The Commission granted its approval in May, on the condition that Microsoft allows consumers to stream Activision games on any cloud streaming service they choose. And in the US, a district judge ruled that the Federal Trade Commission’s (FTC) concerns that Microsoft would restrict access to Call of Duty on PlayStation and Nintendo Switch were unfounded.

The CMA will give its decision on the restructured deal by 18th October 2023, and is inviting comments on the impact the acquisition would have on competition in the UK. Sarah Cardell, Chief Executive of the CMA, said the new proposals “will allow gamers to access Activision’s games in different ways,” including via cloud-based subscription services.

“This is not a green light,” she added. “We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments. Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

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