Microsoft’s Acquisition of Activision Blizzard Nears UK Approval

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Microsoft (NASDAQ:MSFT) has taken a significant step towards finalizing its $69-billion acquisition of video game maker Activision Blizzard (NASDAQ:ATVI), as the U.K.’s Competition and Markets Authority (CMA) has provisionally approved the deal.

The CMA has consistently focused on preserving competition and choice in the cloud gaming sector. Earlier this year, the CMA blocked Microsoft’s initial attempt to acquire the entire Activision Blizzard company due to concerns about competition in the UK’s cloud gaming market.

In response to these concerns, Microsoft proposed a restructured transaction in August. Under this revised deal, Microsoft will not acquire Activision’s cloud gaming rights. Instead, these rights will be sold to an independent third party, Ubisoft Entertainment SA (UBSFY), before the deal’s completion. This arrangement positions Ubisoft as a key content supplier to cloud gaming services, similar to the role Activision would have played.

Ubisoft will have the freedom to offer Activision’s games directly to consumers and to all cloud gaming service providers through various means, including buy-to-play or subscription services. Microsoft has also committed to making Activision games available on operating systems other than Windows and supporting game emulators upon request.

The CMA has determined that this restructured deal addresses most of its concerns about competition in the cloud gaming market. It ensures that essential gaming content remains in the hands of an independent supplier (Ubisoft), preventing Microsoft from consolidating excessive control in this sector.

However, the CMA still has limited concerns about specific provisions in the sale to Ubisoft, which could potentially be circumvented or not enforced. To address these concerns, Microsoft has offered additional remedies to ensure that the terms of the sale of Activision’s cloud streaming rights to Ubisoft are enforceable. The CMA has provisionally concluded that these remedies should resolve the remaining concerns.

The CMA has initiated a consultation period on Microsoft’s proposed remedies, which will continue until October 6.

Microsoft is committed to providing cloud streaming rights in the European Economic Area and has structured the agreement with Ubisoft to align with regulatory requirements. This suggests that Microsoft is taking proactive steps to comply with regulations.

Microsoft sees these developments as positive for various stakeholders, including players, developers, the cloud game streaming market, and the gaming industry as a whole. The company has been working diligently to secure regulatory approval for the transaction and has made binding legal commitments to address concerns.

These commitments ensure that popular games like Call of Duty and others from Activision Blizzard will remain available on rival consoles, including Sony (NYSE:SONY) platforms, and various cloud streaming platforms. The transaction is now poised to move forward in more than 40 countries.

To address regulatory concerns and promote competition in the cloud gaming market, Microsoft has also entered agreements with Nintendo and Nvidia, committing to keep Activision Blizzard games accessible on competing platforms for at least a decade, further ensuring access to these games on various platforms.

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