Tech giant Microsoft has submitted new proposals and alterations to the structure of its proposed takeover of video game publisher Activision Blizzard.
These changes to the originally-proposed deal, which would have seen Activision acquired for nearly $69 billion, are necessary to win approval from the UK’s Competition and Markets Authority (CMA), which moved to block the original agreement in April. This body has until October 18 to make a decision on the new deal and has thus opened a fresh investigation.
Amongst the alterations, Microsoft would not acquire cloud rights outside Europe to current Activision desktop and console game titles, or rights to games developed by Activision over the next 15 years.
The CMA had blocked the proposed takeover four months ago, at the time highlighting concerns over how it could allow Microsoft to monopolize and unfairly dominate the cloud gaming market. Indeed, today (August 22) it has issued an order that “prohibits the original deal on a worldwide basis.”
The CMA’s concerns have centered around Microsoft making Activision’s games such as Call of Duty exclusive to its subscription cloud gaming platform, Xbox Game Pass, in the long run, cutting off distribution to other key industry players, including rival Sony’s PlayStation.
The European Commission approved the original deal in mid-May, while in July a judge in California, US, found against the attempt to block the acquisition by the US’ Federal Trade Commission (FTC).
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These incidents left the CMS as the only body holding up the deal, with Microsoft highly unhappy with the body's original intervention.
Now, in a blog post, Microsoft’s vice chairman and president Brad Smith has said: “Under the restructured transaction, Microsoft will not be in a position either to release Activision Blizzard games exclusively on its own cloud streaming service Xbox Cloud Gaming – or to exclusively control the licensing terms of Activision Blizzard games for rival services.
“We believe that this development is positive for players, the progression of the cloud game streaming market, and for the growth of our industry.”
He said that the transaction “is now in a position to move forward in more than 40 countries.”
In its own statement, meanwhile, the CMA has said that under the new terms and conditions, cloud streaming rights to Activision games outside the European Economic Area would be sold to the Ubisoft rival video game publisher before the Microsoft acquisition.
Sarah Cardell, chief executive of the CMA, stated: "Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously …
“This is not a green light. 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.”
The CMA had originally said that a Microsoft takeover of Activision would mean a reduction in innovation and less choice for gamers in the nascent but fast-growing cloud gaming market.
Microsoft announced its intention to acquire Activision Blizzard in January 2022 in one of the biggest deals the video gaming industry has ever seen.
The agreement would be the most expensive acquisition ever for Microsoft, dwarfing its $26-billion takeover of LinkedIn in 2016, and would see Microsoft paying $95 for each Activision Blizzard share.
Cloud gaming enables gamers to access titles via companies’ remote servers, similar to streaming a movie or live sports on a platform. Microsoft believes it will become the mainstream way of playing games in the future.
The proposed takeover would create a gaming giant, adding Activision’s lineup of popular titles including Call of Duty, World of Warcraft, Hearthstone, Candy Crush Saga, and Overwatch to Microsoft’s growing stable of first-party developers and consoles.
The tech heavyweight said the acquisition would create the world’s third-largest esports and video game company in terms of revenue, behind Tencent and Sony.
The CMA is now inviting comments “from any interested party on the impact that the newly structured merger could have on competition in the UK.”
Bobby Kotick, chief executive at Activision Blizzard, commented that “nothing substantially changes with the addition of this divestiture,” and said the deal had been a “longer journey than expected.”
Regulatory authorities in multiple other countries, including Saudi Arabia, Brazil, and South Africa, have already approved the deal.