Microsoft’s bid to acquire Activision Blizzard has made significant progress, with the UK’s competition regulator provisionally accepting Microsoft’s amendments to the $75 billion deal. The Competition and Markets Authority (CMA) had previously blocked the merger in April due to concerns about potential harm to competition.
In response to the CMA’s reservations, Microsoft and Activision Blizzard submitted a revised merger agreement last month to address these concerns. The new proposal’s central element was an agreement to sell Activision’s cloud streaming rights to the French-based company Ubisoft.
Under this arrangement, Microsoft would not have the exclusive rights to release Activision’s games, including popular titles like World of Warcraft and Diablo, on its own cloud streaming service, Xbox Cloud Gaming. Instead, these games would be available on the Xbox Cloud Gaming platform alongside offerings from other companies.
The CMA stated that Microsoft had made substantial restructuring efforts to address their initial concerns, and they had “limited residual concerns” that certain aspects might be circumvented, terminated, or not enforced. To mitigate these concerns, Microsoft has offered remedies to ensure the enforceability of the sale of Activision’s rights to Ubisoft. The CMA has provisionally concluded that these additional protections should address the remaining concerns.
Sarah Cardell, the CEO of the CMA, pointed out that it would have been more beneficial if Microsoft had proposed this restructuring during the initial investigation. She emphasized that the CMA’s position has remained consistent throughout the process.
Gareth Sutcliffe, a games analyst at Enders Analysis, noted that with cloud gaming being a relatively small sector within the gaming industry, the provisional approval represents a significant compromise for both Microsoft and Activision Blizzard.
The CMA’s consultation period for the revised proposal will run until October 6, clearing the way for final approval ahead of the extended deadline for completing the deal, which is set for October 18.
Since the CMA’s initial decision to block the deal, Microsoft has entered into further licensing agreements with competitors, including Sony, the parent company of PlayStation. These agreements aim to alleviate regulatory concerns regarding access to Activision’s games.
Brad Smith, Microsoft’s President, expressed optimism about the positive developments in the CMA’s review process and the company’s commitment to addressing remaining concerns related to cloud game streaming.
An Activision spokesperson welcomed the preliminary approval, describing it as “great news for our future with Microsoft.” However, there may be questions about how Microsoft’s top executives, including Brad Smith and Phil Spencer, read the UK market and regulators, and whether they will be held accountable for the delays and costs incurred during the approval process.
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