Microsoft restructures Activision Blizzard deal in bid to win UK regulatory approval
Microsoft Corp. has restructured its proposed acquisition of Activision Blizzard Inc. to win regulatory approval for the deal in the U.K.
The company announced the move this morning.
Microsoft inked a $68.7 billion deal to buy Activision Blizzard, one of the world’s largest video game developers, early last year. The U.K.’s Competition and Markets Authority, or CMA, launched a probe into the acquisition shortly thereafter. The regulator decided to block the deal this past April after determining that it poses antitrust concerns.
Before the deal was blocked, Microsoft proposed a set of antitrust commitments to address the CMA’s concerns. The regulator rejected those commitments as insufficient. The newly announced move to restructure the acquisition is an effort on Microsoft’s part to more directly address the CMA’s concerns.
The CMA blocked the deal after finding it could negatively affect the cloud gaming market, where Microsoft is a major player. The concern was that the tech giant would make Activision Blizzard content available exclusively on its cloud gaming service and block rivals’ access. Following a review, the CMA found that Microsoft would “find it commercially beneficial” to implement such a policy.
According to Microsoft, the restructured acquisition addresses that concern. The company says the new deal terms prevent it from making Activision Blizzard games available exclusively on its cloud gaming service.
“Microsoft will not be in a position either to release Activision Blizzard games exclusively on its own cloud streaming service – Xbox Cloud Gaming – or to exclusively control the licensing terms of Activision Blizzard games for rival services,” Microsoft President Brad Smith wrote in a blog post today.
Under the restructured deal, Microsoft will sell “cloud rights” to all existing Activision Blizzard games to Ubisoft Entertainment SA, a major video game developer. The deal also includes the rights to any new content Activision Blizzard will publish over the next 15 years. In exchange, Ubisoft will pay Microsoft a lump sum of undisclosed size as well as additional fees that are set to be determined through a “wholesale pricing mechanism.”
Any cloud gaming providers that wish to make Activision Blizzard content available to their users will have to obtain a license from Ubisoft. That includes Microsoft. Under the terms of the deal, Ubisoft may license Activision Blizzard games to companies under “different business models” and for use on operating systems other than Windows.
The CMA’s April decision to block the deal was motivated by several reasons. Besides addressing the regulator’s main concern, namely that Microsoft could make Activision Blizzard content available exclusively on its services, the restructured deal also tackles a number of other issues.
Microsoft at one point offered the CMA a set of commitments aimed at reducing antitrust risks. According to the regulator, those commitments would have seen the company license Activision Blizzard games to competing cloud streaming providers. However, the CMA took issue with the proposed licenses’ terms and ultimately rejected the proposal.
By relegating content licensing to Ubisoft, Microsoft may have a higher chance of receiving a green light from the regulator.
The CMA today launched a review of Microsoft’s new deal terms. It expects to make a decision by Oct. 18. In the meantime, CMA officials are inviting interested parties to submit feedback about the restructured acquisition.
“This is not a green light,” said CMA Chief Executive Sarah Cardell. “We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments.”
Microsoft’s agreement with Ubisoft doesn’t cover the European Economic Area, which includes the European Union, Iceland, Liechtenstein and Norway. The reason has to do with a set of antitrust commitments Microsoft made to EU officials earlier this year.
Like the CMA, the EU raised concerns about the Activision Blizzard deal’s potential impact on the cloud gaming market. To address those concerns, Microsoft agreed to license Activision Blizzard content to rival cloud gaming providers at no charge within the EU. “The agreement with Ubisoft has been structured so that Microsoft will still acquire the rights needed to honor fully its legal obligations under its commitments to the European Commission,” Smith explained.
A message from John Furrier, co-founder of SiliconANGLE:
Your vote of support is important to us and it helps us keep the content FREE.
One click below supports our mission to provide free, deep, and relevant content.
Join the community that includes more than 15,000 #CubeAlumni experts, including Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many more luminaries and experts.