After a long and winding journey of twenty months filled with regulatory hurdles and dramatic developments, Microsoft's landmark deal to acquire Activision Blizzard, the publisher of renowned gaming franchises such as Call of Duty and Candy Crush, for a whopping $69 billion is finally coming to fruition. This acquisition, which stands as the largest gaming merger ever, has been provisionally approved by the UK’s Competition and Markets Authority (CMA).
The CMA's approval comes after Microsoft made significant revisions to the acquisition, which now includes selling Activision Blizzard's streaming rights to Ubisoft. Colin Raftery, the CMA’s senior director of mergers, stated, "This is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft."
Previously, the CMA had rejected the deal due to concerns that Microsoft's acquisition of popular gaming franchises like Call of Duty, Overwatch, Diablo, and more would give the tech giant an unfair monopoly in the cloud gaming space. In response to this, Microsoft hinted it might remove Activision games from the UK entirely and even considered closing the deal without the Federal Trade Commission's (FTC) approval in the U.S., which had expressed anti-trust concerns.
Following a multi-day trial in federal court, which featured testimonies from gaming executives from Xbox, PlayStation, Bethesda, and other companies, the judge ruled in favor of Microsoft. This ruling paved the way for Microsoft to close the deal in the U.S., forcing the CMA back into negotiations and leading to a reversal of its previous rejection.
To appease UK regulators, Microsoft has agreed to sell cloud gaming rights for Activision Blizzard’s games to Ubisoft. While Microsoft can still stream hits like Modern Warfare II and Diablo IV on services like Game Pass, Ubisoft will have the final say for the next 15 years, preventing Microsoft from having exclusive control. This agreement only applies to the UK, however, and the CMA's final approval is contingent on Microsoft providing an enforcement mechanism to ensure adherence to the terms of the agreement.
Sarah Cardell, CEO of the CMA, stated, "The CMA’s position has been consistent throughout–this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved." She also expressed disappointment that Microsoft didn't propose this restructure during the original investigation, highlighting the costs, uncertainty, and delay that can occur when parties don't present effective remedy options at the right time.
Notably, the CMA's provisional approval comes just one day after UK treasury head, Jeremy Hunt, met with gaming companies in California. Activision Blizzard CEO Bobby Kotick, who earlier threatened that the UK would become a "Death Valley" if it did not approve the sale, was among the executives in attendance.
The CMA has now given Microsoft the green light to close the Activision deal on or before its new October 18 deadline. This monumental acquisition will undoubtedly have far-reaching implications for the gaming industry, potentially reshaping the landscape of cloud gaming and setting a new precedent for future mergers and acquisitions in the sector.
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