Microsoft’s $69 billion acquisition of Activision Blizzard has a new chance of gaining approval from UK regulators. Microsoft has presented a significantly different deal to the UK’s Competition and Markets Authority (CMA), which will initiate a new review process. In an unexpected move, Microsoft has offered Ubisoft Entertainment SA the rights to globally distribute Activision games. This move aims to address concerns about potential dominance in the cloud gaming market, which had raised regulatory worries.
This development has had an impact on the stock market. Ubisoft’s shares surged by as much as 9.2% in Paris, marking the biggest intraday gain since February. Meanwhile, Microsoft’s stock remained relatively stable during US premarket trading, while Activision’s shares increased by 1.1%. Currently, Activision’s shares are trading around $91 each in market, meanwhile the original offer price was $95.
This reconsideration by the CMA is highly uncommon and follows a series of unexpected twists in the global regulatory process for this acquisition. Despite being seemingly stalled, the deal gained momentum after the UK agreed to reevaluate new evidence. In the US, Microsoft successfully countered a legal challenge from the Federal Trade Commission. Additionally, the European Union approved the deal in May with certain behavioral adjustments.
The CEO of the CMA, Sarah Cardell, mentioned in an interview that the new deal seems to shift the control of cloud streaming rights away from Microsoft to an independent entity. This change will address the CMA’s previous concerns. This is about Microsoft’s potential control over the development of the cloud gaming market.
Microsoft’s role
Due to regulatory challenges, Microsoft missed the original July 18 deadline to complete the acquisition, which was initially agreed upon in January 2022. Now the deadline is extended to October 18
In its effort to gain UK regulatory approval, Microsoft asked the CMA to reconsider its April veto. The company argued that circumstances had “materially changed,” pointing to the US court ruling. And its subsequent agreement to license Activision’s popular game “Call of Duty” to Sony Group Corp, a direct rival.
Microsoft clarified that under the revised deal, it won’t have exclusive rights of releasing the Activision Blizzard games. Therefore it won’t be available on its own cloud streaming service, Xbox Cloud Gaming, nor will it have exclusive control over the licensing terms for these games on competing services.
What Ubisoft has to say:
Ubisoft confirmed that the rights granted to it will be permanent and they will be integrate it into its Ubisoft+ subscription service. Ubisoft’s rights include global distribution of Activision games via its subscription platform. As well as the ability to license the games to Microsoft and other cloud gaming and console companies. These rights will be applicable to games released over the next 15 years following the closure of the Microsoft-Activision deal.
The CMA prefers structural solutions to address competition concerns stemming from mergers. To align with this preference, Microsoft and Activision have been working on a divestiture strategy. This satisfies regulators without compromising the core components of the acquisition. Microsoft has ruled out selling the Call of Duty franchise as part of this divestiture.
It is said that In order to compensate Microsoft for the granted rights, Ubisoft is expected to make a one-time payment . Also, to determine pricing on the basis of usage in market, they will introduce wholesale pricing mechanism. The deal also ensures that Microsoft can honor its existing streaming agreements in the European Economic Area. Also they were to meet demands from the European Commission.
The first phase of the review process will now begin, with the CMA setting an official deadline of October 18 for its decision.
Disclaimer: The information in this blog is for informative and awareness purposes only.
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Sukhpreet Kaur
