Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard’s games character.
Dado Ruvic | Reuters
Microsoft on Tuesday submitted a recent deal for the takeover of Activision Blizzard, offering a spate of concessions after U.K. regulators rejected its initial proposal.
The U.S. technology giant first recommend the $69 billion acquisition of Activision in January 2022, but has since faced regulatory challenges within the U.S., Europe and U.K.
On Tuesday, the U.K.’s Competition and Markets Authority confirmed it has blocked the unique deal. However, it said Microsoft and Activision have agreed to a recent, restructured agreement, which the CMA will now investigate with a call deadline of Oct. 18.
The Redmond tech giant anticipates the review may be accomplished before this time, Microsoft President Brad Smith said in a Tuesday statement.
Under the restructured deal, Microsoft won’t acquire cloud rights for existing Activision PC and console games, or for brand spanking new games released by Activision throughout the next 15 years, the CMA said. Instead, these rights will likely be divested to French game publisher Ubisoft Entertainment prior to Microsoft’s acquisition of Activision, the CMA added.
Ubisoft shares were up greater than 4% in early Europe trade.
The CMA has been the hardest critic of the takeover, citing concerns that the deal would hamper competition within the nascent cloud gaming market.
Cloud gaming is seen as the following frontier within the industry, offering subscription services that allow people to stream games just as they’d movies or shows on Netflix. It could even remove the necessity for expensive consoles, with users playing the games on PCs, mobile and TVs as an alternative.
Regulators previously argued that Microsoft could also take key Activision games, like Call of Duty, and make them exclusive to Xbox and other Microsoft platforms.
Authorities within the European Union were the primary major regulator to clear the deal back in May. To cross that line, Microsoft offered concessions, equivalent to offering royalty-free licenses to cloud gaming platforms to stream Activision games, if a consumer has purchased them.
The CMA refused similar measures on the time, which it felt would allow Microsoft to “set the terms and conditions for this marketplace for the following ten years.”
In the U.S., the Federal Trade Commission was fighting a legal battle with Microsoft in an effort to get the Activision takeover scrapped. In July, a judge blocked the FTC’s try and achieve this, clearing the way in which for the deal to go ahead within the U.S.
Just hours later, the CMA said it was “ready to think about any proposals from Microsoft to restructure the transaction” and allay the regulator’s concerns.
The restructured deal and cloud rights divestment to Ubisoft are intended to offer an independent third-party content supplier with the power to produce Activision’s gaming content to all cloud gaming service providers, including to Microsoft itself.
Ubisoft will find a way to license out Activision content under different business models, including subscription services.
The deal would also require Microsoft to offer versions of games on operating systems aside from Windows, which it owns.
“Microsoft has notified a recent and restructured deal, which is substantially different from what was placed on the table previously,” Sarah Cardell, CEO of the CMA, said in an announcement.
“As a part of this recent deal, Activision’s cloud streaming rights outside of the EEA (European Economic Area) will likely be sold to a rival, Ubisoft, who will find a way to license out Activision’s content to any cloud gaming provider. This will allow gamers to access Activision’s games in alternative ways, including through cloud-based multigame subscription services.”
Cardell emphasised this shouldn’t be a signal of an approval for the deal.
“This shouldn’t be a green light. We will rigorously and objectively assess the small print of the restructured deal and its impact on competition, including in light of third-party comments.”
For its part, Microsoft will likely be compensated for its divestment to Ubisoft “through a one-off payment and thru a market-based wholesale pricing mechanism, including an option that supports pricing based on usage. It may even give Ubisoft the chance to supply Activision Blizzard’s games to cloud gaming services running non-Windows operating systems,” Smith said Tuesday.
“We’re dedicated to delivering amazing experiences to our players wherever they decide to play,” Chris Early, senior vice chairman of strategic partnerships and business development at Ubisoft, said on Tuesday. “Today’s deal will give players much more opportunities to access and luxuriate in a number of the biggest brands in gaming.”