The United Kingdom’s Competition and Markets Authority (CMA) has granted preliminary approval for Microsoft’s ambitious $69 billion acquisition of Activision Blizzard. This decision comes following months of scrutiny and deliberation over the potential impact of the deal on the gaming industry, particularly in the realm of cloud gaming.
The CMA had at first raised worries about the acquisition, expecting that it could prompt Microsoft using a staggering share of the cloud gaming market. However, Microsoft’s recent restructuring of the deal, which involves transferring cloud gaming rights to Ubisoft, has seemingly assuaged these concerns.
The CMA’s preliminary approval is a vital step in the process, but it should be noted that a final decision is pending, with the regulatory body seeking third-party feedback on Microsoft’s proposed remedies.
This discussion period is set to go on until October sixth, after which a final ruling will be issued, expected to be well ahead of the extended October 18th deadline.
Activision Blizzard, the maker of renowned gaming franchises such as Call of Duty and World of Warcraft, began in earnest in January 2022 when it announced its intention to acquire the gaming giant.
This move, with a stunning price of $69 billion, was ready to be the biggest takeover throughout the entire history of the gaming business.
At the core of Microsoft’s motivation was its desire to strengthen its foothold in the gaming market, boost demand for its Xbox console, and expand its gaming subscription business.
The acquisition planned to bring under Microsoft’s umbrella the absolute most notorious and worthwhile gaming properties on the planet, including Call of Duty, Overwatch, Candy Crush, and many others.
This strategic move promised to reshape the gaming landscape and potentially alter the dynamics of competition in the industry.
All along, Microsoft’s offered to acquire Activision Blizzard confronted examination from regulators across the globe. The concerns primarily revolved around the impact of the merger on competition, innovation, and consumer choice, particularly in the burgeoning field of cloud gaming.
The European Union, in May of that very year, approved the deal after a thorough review, seemingly satisfied that it wouldn’t unduly stifle competition.
However, the United States’ Federal Trade Commission (FTC) initiated legal action to block the merger, leading to a protracted legal battle. Ultimately, the FTC’s efforts were unsuccessful as a federal court ruled against the injunction, allowing the deal to proceed in the United States.
In the UK, the CMA raised significant worries about the possible concentration of power in the cloud gaming market.
The fear was that if Microsoft were to acquire Activision Blizzard, it could attain a dominant position in the industry, giving it the ability to withhold games from competitors and potentially harm competition.
This concern was rooted in the fact that cloud gaming, which involves streaming games over the internet to consoles and mobile devices, was rapidly gaining traction as a preferred mode of gaming.
Confronting opposition from UK regulators, Microsoft needed to plan and find an answer that would address the CMA’s interests. In a critical move, company’s chose to rebuild the deal, aiming to alleviate the apprehensions of regulators while still securing the acquisition.
The critical part of this rebuilding included Microsoft consenting to sell the cloud gaming rights for Activision Blizzard’s games beyond Europe to Ubisoft, a prominent French video game publisher.
This transfer of rights was negotiated for a period of 15 years, ensuring that cloud streaming of games like Call of Duty, Overwatch, and World of Warcraft would not be under Microsoft’s direct control. Instead, Ubisoft would become the custodian of these cloud streaming rights.
This strategic maneuver was designed to create a more competitive environment in the cloud gaming market, preventing company from wielding disproportionate influence.
By entrusting these rights to Ubisoft, aimed to demonstrate its commitment to preserving competition and choice in the gaming industry.