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Microsoft submits revised Activision takeover deal to British regulators

By Nithya Bose in Microsoft News, posted August 23, 2023

Microsoft has resubmitted its Activision Blizzard takeover proposal to try to win over the UK regulators who rejected its initial offer.

The tech giant’s first bid for the gaming giant in January 2022 faced regulatory hurdles in the UK, the US, and Europe.

On Tuesday, August 22, the UK's Competition and Markets Authority (CMA) officially denied the original deal.

However, it said Microsoft and Activision have agreed to a restructured agreement.

The CMA will now scrutinise that agreement and has set a decision deadline of October 18.

Microsoft's President, Brad Smith, said the company the review could conclude before this deadline.

Under this restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games or new releases from Activision over the next 15 years.

Instead, these rights will be divested to French game publisher Ubisoft Entertainment before Microsoft's acquisition of Activision is finalized.

The CMA has been a staunch critic of the $69 billion Activision takeover, citing concerns that it would stifle competition in the emerging cloud gaming market.

Cloud gaming represents the next frontier in the gaming industry, offering subscription-based services.

It enables users to stream games, eliminating the need for expensive gaming consoles.

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Regulators had previously voiced concerns that Microsoft could make key Activision titles, such as Call of Duty, exclusive to Xbox and other Microsoft platforms.

In contrast, the European Union approved the deal in May.

It was after Microsoft offered concessions like granting royalty-free licenses to cloud gaming platforms for streaming Activision games purchased by consumers.

However, the CMA rejected these measures, as they were seen as enabling Microsoft to dictate market terms for the next decade.

In the US, Microsoft faced legal opposition from the Federal Trade Commission, which sought to halt the Activision takeover.

In July, a judge ruled against the FTC's efforts, clearing the path for the acquisition.

Shortly, the CMA indicated its readiness to consider restructuring proposals from Microsoft to address regulatory concerns.

Microsoft's new proposal includes divesting cloud streaming rights outside the European Economic Area (EEA) to Ubisoft.

It enables them to license Activision content to various cloud gaming providers.

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This move ensures gamers can access Activision's games through various avenues, including cloud-based multi-game subscription services.

However, the CMA said this does not constitute approval of the deal.

They will meticulously assess the details of the restructured agreement and its impact on competition, considering third-party feedback.

In return for the divestment to Ubisoft, Microsoft will receive compensation through a one-off payment and a market-based wholesale pricing mechanism.

It includes an option for usage-based pricing.

Ubisoft will also have the opportunity to offer Activision Blizzard's games on cloud gaming services running non-Windows operating systems.

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