Microsoft Corp.’s $69-billion (R1.29-trillion) Activision Blizzard Inc. acquisition got a new chance at winning approval from UK regulators after the tech giant submitted a substantially different deal to the country’s antitrust watchdog.
In a rare move, the Competition and Markets Authority will open a new probe after Microsoft said it would give French video game publisher Ubisoft Entertainment SA cloud streaming rights for Activision games, potentially easing concerns over its potential to control the nascent but fast-growing market.
The CMA has set a new deadline of Oct. 18 for an initial ruling.
The CMA’s reversal follows a series of dramatic twists and turns.
The proposed takeover was thought moribund after running up against concerns from a number of antitrust watchdogs, but gained unexpected momentum after Microsoft beat the Federal Trade Commission’s court challenge over the deal.
The European Union cleared the deal with behavioural remedies in May.
That left the CMA, which blocked the transaction in April, as the only hurdle.
The revised deal grants Ubisoft exclusive streaming rights outside of the European Economic Area of all Activision Blizzard titles, including Call of Duty, for the next 15 years.
Inside the bloc, Ubisoft gets non-exclusive streaming rights to the same titles.
Financial terms of the deal weren’t disclosed. But the CMA said the transaction is intended to provide an independent third-party content supplier with the ability to supply Activision’s gaming content, including hit games like Call of Duty, to other cloud-gaming service providers.
That would include Microsoft itself and Amazon.com Inc.’s Luna, which competes with Microsoft’s Xbox.
Ubisoft has its own cloud streaming service known as Ubisoft+, which costs $14.99 a month for access to more than 100 PC games.
The regulator also said Ubisoft would be able to require Microsoft to provide versions of games on operating systems other than Windows.
In theory, Ubisoft could force Microsoft to make a version of Call of Duty for Apple Inc.’s cloud streaming platform, for example.
Microsoft rose less than 1% in New York and Activision gained about 1% to $91.70. While that’s lower than Microsoft’s $95 offer price, the gap has been narrowing, suggesting the market expects the deal to ultimately close.
Ubisoft, which owns the Assassin’s Creed franchise, jumped 9% in Paris.
The CMA had consistently expressed concern that the combination would choke off competition in cloud gaming, a corner of the market where the regulator sees gaming heading in the future, though there is still skepticism about its mass appeal.
The CMA concluded early on that under Microsoft, Activision wouldn’t have enough incentive to seed its games across multiple services.
“We had a real concern previously that Microsoft would be able to control the way that that market was going to develop,” Sarah Cardell, chief executive officer of the CMA, said in an interview on Bloomberg Radio.
“What we see with this new deal, and we will have to test it carefully through our review, is that rather than Microsoft being able to control how those cloud streaming rights are used, that control will shift to an independent company.”
The cloud gaming market is expected to grow to $8.2 billion by the end of 2025, from an estimated $2.4 billion at the end of 2022, according to gaming analytic firm NewZoo. That compares with the total video game market of about $183 billion.
Microsoft asked the UK regulator in July to reconsider its April veto on the grounds that the situation had “materially changed,” given the US court decision and a subsequent deal it reached to license Activision blockbuster title Call of Duty to rival Sony Group Corp.
“Under the restructured transaction, 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 said in its own statement.
Microsoft said it will still be able to acquire the rights it needs to honor its obligations in the European Economic Area, where it struck deals with other streaming providers to satisfy commitments to the European Commission.
Ubisoft will make a one-off payment to compensate Microsoft for the rights in addition to a “market-based wholesale pricing mechanism” that will support pricing based on usage.
Activision chief executive officer Bobby Kotick said in a letter to employees that, “For us, nothing substantially changes with the addition of this divestiture. Our merger agreement with Microsoft, closing deadline, and the cash consideration to be paid for each Activision Blizzard share at closing remain the same.”
The CMA has said it prefers structural remedies to address concerns about mergers that hinder competition.
To satisfy that preference, Microsoft and Activision have been seeking a divestiture that wins over regulators without harming what Microsoft considers the key parts of the acquisition.
The software giant has publicly ruled out selling the Call of Duty franchise, for example.