Sign up for the GI Daily here to get the biggest news straight to your inbox
At a glance
- CMA says preliminarily approves MS-ABK deal as sale of cloud gaming rights to Ubisoft address most concerns
- But regulator still has “residual concerns,” for which Microsoft has proposed further remedies
- CMA now consulting on these remedies, decision expected by October 6
The UK’s Competition and Markets Authority has taken a significant step forward in approving Microsoft’s proposed acquisition of Activision Blizzard, and aims to make a final decision by October 6.
The regulator – which blocked the deal earlier this year – announced this morning that it believes the modified transaction Microsoft submitted last month addresses most of its concerns over whether the deal would harm competition, specifically in the cloud gaming space.
Microsoft has proposed divesting the cloud gaming rights for all current Activision Blizzard titles, plus any released in the next 15 years, to Ubisoft. The Assassin’s Creed publisher would then be able to distribute these to other streaming services, thus preventing Microsoft from making them exclusive to its own cloud gaming ecosystem.
The CMA said this sales of the cloud gaming rights will “establish Ubisoft as a key supplier of content to cloud gaming services, replicating the role that Activision would have played in the market as an independent player.”
“The deal with Ubisoft also requires Microsoft to port Activision games to operating systems other than Windows and support game emulators when requested, addressing the other main shortcoming with the previous remedies package,” the regulator said.
However, the CMA stopped short of fully approving the deal as it has “limited residual concerns” that certain conditions in this sale of cloud gaming rights to Ubisoft “could be circumvented, terminated or not enforced.”
Microsoft has offered further remedies to address these concerns in a way that would be enforceable by the CMA.
While the regulator has provisionally concluded that these should add the protection needed, it has now opened a consultation to thoroughly consider them.
The consultation will close on October 6, after which the CMA is expected to make a final decision on approving Microsoft’s purchase of Activision Blizzard.
The deal was due to be closed by July 18, 2023, but Microsoft and Activision Blizzard agreed to extend this deadline to October 18.
If Microsoft is unable to complete the merger by this time, it will pay Activision Blizzard a fee of $4.5 billion and need to renegotiate the deal.
“The CMA’s position has been consistent throughout – this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved,” the CMA’s CEO Sarah Cardell said. “In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns.
“It would have been far better, though, if Microsoft had put forward this restructure during our original investigation. This case illustrates the costs, uncertainty and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time.”
Microsoft’s president and vice chair Brad Smith welcomed this preliminary decision, stating: “We are encouraged by this positive development in the CMA’s review process. We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18 deadline.”
Meanwhile, in a letter to Activision Blizzard employees shared online, the publisher’s CEO Bobby Kotick said: “This is a significant milestone for the merger and a testament to our solutions-oriented work with regulators. I remain optimistic as we continue the journey toward completion and am very grateful to each of you for your dedication and focus throughout this process.”
As the Microsoft-Activision deal nears the finish line, you can catch up on all the regulatory hurdles it has faced in our extensive primer.
