What you need to know
- Microsoft announced its plans to purchase Activision Blizzard, Inc. in January 2022 for a record-setting $68.7 billion.
- The merger has undergone scrutiny, including legal action, from various regulatory bodies around the globe.
- The UK's Competition and Markets Authority was the only regulatory agency to deny the merger outright, with more than 40 other countries approving the deal.
- Microsoft's Vice Chair and President Brad Smith have announced that the acquisition has been restructured to narrow the rights by transferring cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment SA.
- The transfer of rights will remain in perpetuity.
- The current acquisition agreement between Activision Blizzard and Microsoft expires on October 18 after being extended when the clock ran out for regulatory approval in July.
Microsoft's efforts to appease the concerns of the UK's Competition and Markets Agency (CMA) as they seek approval for a record-setting $69 billion merger with Activision Blizzard continues. In their rejection of the acquisition, the CMA expressed concerns about the nascent cloud gaming market. In the latest unexpected twist relating to Microsoft's efforts to push the deal across the finish line Vice Chair and President Brad Smith has penned a blog detailing an arrangement for Microsoft to sell the rights for cloud streaming ABK titles to Ubisoft Entertainment SA.
To address the concerns about the impact of the proposed acquisition on cloud game streaming raised by the UK Competition and Markets Authority, we are restructuring the transaction to acquire a narrower set of rights. This includes executing an agreement effective at the closing of our merger that transfers the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment SA, a leading global game publisher. The rights will be in perpetuity.
Brad Smith, Microsoft VCP
The newly restructured agreement between Microsoft and Activision Blizzard will narrow the rights that Microsoft receives as part of the transaction, instead transferring cloud streaming rights for all current and new Activision Blizzard PC and console games that are released over the next 15 years to Ubisoft Entertainment SA. Microsoft will no longer be able to release ABK titles on Xbox Cloud Gaming exclusively, nor will Microsoft exclusively control the licensing terms for rival cloud streaming services.
Microsoft has previously entered into agreements with several cloud streaming providers, including NVIDIA, Boosteroid, Ubitus, and Nware, to provide ABK titles to those services upon the closure of the acquisition. During the Xbox vs. FTC trial, however, the FTC tried to paint a scenario where Microsoft effectively chose its competitors in the cloud gaming space by determining who could gain access to ABK's library of games, including the annual blockbuster Call of Duty. The FTC argued that Microsoft could effectively foreclose on an otherwise successful cloud streaming competitor by withholding ABK games from their service. However, this argument fell flat in court as the judge ruled in Microsoft's favor.
The European Union had similar concerns about cloud gaming foreclosures. Still, unlike the CMA, they were content with the marketing agreements between Microsoft and other cloud streaming platforms to provide access to the Activision Blizzard library. According to Brad Smith, the rights acquired by Ubisoft for cloud streaming should the CMA approve the newly reworked acquisition have been negotiated in such a way as to maintain the integrity of the original streaming deals, keeping Microsoft and Activision Blizzard in compliance with the remedies they presented to the EU.
The CMA in the UK has been intent on going all in on concerns related to cloud streaming, holding steadfast that the negotiated agreements with NVIDIA, Boosteroid, and the like were insufficient. The regulatory body has been the lone holdout preventing the acquisition from closing by its original July 18 deadline. Microsoft and Activision Blizzard were forced to renegotiate the deal and extend the deadline to October 18.
Due to the acquisition being restructured, the CMA will now need to reassess the deal and provide a response on whether or not the new remedy with Ubisoft will be sufficient for approval.
"Since our initial announcement with Activision Blizzard in January last year, we have endeavored to earn regulatory approval for the transaction, addressing concerns when raised, including by entering into binding legal commitments to bring Call of Duty to rival consoles and Activision Blizzard games to rival cloud streaming platforms. As a result, the transaction now is in a position to move forward in more than 40 countries," writes Brad Smith of the restructured agreement, "We believe that this development is positive for players, the progression of the cloud game streaming market, and for the growth of our industry."
This is a developing story and we will continue to update as more information becomes available.
