Microsoft Submits Revised Activision Blizzard Proposal to UK’s CMA

Microsoft has proposed a fresh revised deal for the Activision Blizzard acquisition, giving a number of concessions. The resubmission comes after the initial deal was rejected. Early last year, Microsoft, the company that owns Xbox, made a pitch for Activision Blizzard. After China’s Tencent and Sony of Japan, it sought to become the third-largest gaming company in the world by revenue. The US tech titan first proposed a $69 billion acquisition. However, it faced extensive legislative scrutiny in the US, Europe, and the UK. The original contract was halted, the UK’s Competition and Markets Authority stated. It further claimed that a new, restructured arrangement had been reached between Microsoft and Activision. The CMA will analyze the acquisition agreement and will come to a conclusion by October 18.

Microsoft’s Revised Agreement to the UK

Microsoft is seeking to alter its arrangement to acquire a more limited set of rights in order to allay concerns voiced by the UK CMA regarding the proposed acquisition’s potential impact on cloud game streaming. Microsoft will not be able to exclusively release Activision Blizzard titles on its proprietary cloud streaming service, Xbox Cloud Gaming, under the terms of the revised agreement. Additionally, it will have to give up exclusive control over Activision Blizzard game license agreements to competing providers. Additionally, it will not purchase cloud rights for current Activision PC and console games for new Activision games developed over the course of the following 15 years.

Instead, French video game producer Ubisoft Entertainment will receive permanent rights. A distinct third-party content provider is anticipated to be made available through the new agreement and cloud rights divestiture to Ubisoft. Microsoft will then be allowed to provide Activision’s game content to all other online gaming service providers as well as to itself. Activision content will be available for licensing through a variety of revenue models, including subscription services, for Ubisoft. As part of the agreement, Microsoft would also have to offer game versions for other operating systems besides its own Windows.

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Ubisoft Benefits Amidst the Scrutiny

The arrangement gives Ubisoft an unparalleled chance to make money off cloud streaming of video games. It will provide Ubisoft with the opportunity to develop and support various business models. These cover the licensing and cost of the games available on international cloud streaming systems. Microsoft will get a one-time payment from Ubisoft in exchange for cloud streaming rights to Activision Blizzard’s titles. It will additionally depend on the wholesale pricing structure of the market, with the ability to accommodate usage-based pricing. Additionally, Ubisoft will have the chance to make Activision Blizzard games available through cloud gaming services that use non-Windows operating systems.

Sarah Cardell, CEO of the CMA said in the announcement,

As part of this new deal, Activision’s cloud streaming rights outside of the EEA (European Economic Area) will be sold to a rival, Ubisoft, who will be able to license Activision’s content to any cloud gaming provider. This will allow gamers to access Activision’s games in different ways, including through cloud-based multigame subscription services. This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments.

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Microsoft and Regulatory Backlash

The U.K.’s Commission and Market Authority have been the takeover’s harshest skeptics. It has brought up worries that the agreement might reduce competition in the just-starting cloud gaming business. Cloud gaming is believed to be the future of business. People will be free to stream games using subscription services just like they can with movies and television shows. Additionally, since cloud games are compatible with PCs, smartphones, and TVs, it would be unnecessary to purchase pricey consoles. Although the market for cloud streaming games is tiny, the CMA contends that the acquisition of a major developer of mega games by a top cloud gaming service provider would impede the emergence of healthy competition.

The CMA first announced its block to the acquisition in April. It stated that it could lead to reduced innovation and fewer choices for UK gamers in the years to come. Regulators previously also argued that Microsoft could take key Activision games like Call of Duty, World of Warcraft, etc, and make them Xbox and other Microsoft platforms exclusive.

Microsoft – Activision Blizzard Whirlwind

EU regulators were the first authority that originally approved the agreement in May. To cross that boundary, Microsoft made major concessions. They included royalty-free licensing to cloud gaming platforms for the streaming of Activision titles. However, the CMA rejected such proposals at the time. It believed they would give Microsoft the power to dictate the rules and regulations in this field for the following ten years. Although the EU has given the merger the go-ahead, British and American regulators have been more cautious out of worry that doing so might give Microsoft an excessive amount of control over cloud gaming.

In an effort to stop Microsoft from acquiring Activision, the Federal Trade Commission in the US engaged in an arbitration dispute with the software giant. A judge halted the FTC’s attempts to do so in July. This made it possible for Microsoft to proceed with the deal in the US. As soon as US regulators learned that the EU had authorized the idea, they quickly did the same. Later, the CMA stated that it was also prepared to take into account any suggestions from Microsoft for reorganizing the agreement and easing regulators’ worries.

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Microsoft’s commitment to regulation compliance

With complete adherence to and dedication to the EU, Microsoft commits to approve cloud streaming rights in the EEA. With the Ubisoft agreement, Microsoft will continue to obtain the rights necessary to fulfill its commitments to the EC. It will also extend the current legal obligations to other cloud gaming streaming services, like NVIDIA, Boosteroid, Ubitus, and Nware. Microsoft and the European Commission are working closely to assist each other’s assessments of the agreement. Further, it ensures to make sure that the obligations are upheld. It is presently attempting to enter into legally binding agreements to launch  Call of Duty on competing consoles. Additionally, it will be accessible through cloud streaming platforms for Activision Blizzard titles. Thus, the transaction is now in a position to move forward in 40+ countries.

Brad Smith, Vice President of Microsoft stated in the blog post

We believe that this development is positive for players, the progression of the cloud game streaming market, and the growth of our industry. And, as we continue to navigate the review process with the CMA, we remain as committed as ever to bringing the incredible benefits of the acquisition to players, developers, and the industry

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