Microsoft Submits New Activision Blizzard Deal for Review After CMA Confirms Original Deal Block
Microsoft has submitted a new Activision Blizzard deal for review after the UK’s Competition and Markets Authority (CMA) confirmed the original deal is blocked.
In April, the CMA announced its “Final Report” on the acquisition, citing competition concerns around cloud gaming in the UK. Since then, Microsoft has defeated the U.S.’s Federal Trade Commission (FTC) in court, obtained approval from key regulator the European Commission, and secured an agreement with console rival Sony for the provision of Activision games on PlayStation for a decade.
In July, Microsoft sent its final submission to the CMA, outlining why it believed the organisation should reconsider its block on the proposed $69 billion buyout of Activision Blizzard. But today the CMA reaffirmed its decision, saying Microsoft's submission changed nothing as far is it was concerned.
Now, to address the CMA’s concerns, Microsoft has restructured the deal to buy a “narrower” set of rights. This includes signing a deal with Assassin’s Creed maker Ubisoft to sell the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years (excluding the European Economic Area). The rights will be in perpetuity.
"As a result of the agreement with Ubisoft, Microsoft believes its proposed acquisition of Activision Blizzard presents a substantially different transaction under UK law than the transaction Microsoft submitted for the CMA’s consideration in 2022," Microsoft president Brad Smith said.
"As such, Microsoft today has notified the restructured transaction to the CMA and anticipates that the CMA review processes can be completed before the 90-day extension in its acquisition agreement with Activision Blizzard expires on October 18."
Microsoft said that under the restructured buyout, it will not be in a position either to release Activision Blizzard games exclusively on Xbox Cloud Gaming, or exclusively control the licensing terms of Activision Blizzard games for rival services, opening the possibility of Activision Blizzard games appearing on PlayStation and Nintendo consoles on cloud gaming services. Ubisoft can now commercialise the distribution of the games via cloud streaming, including to Microsoft itself.
Ubisoft will buy the cloud streaming rights to Activision's games through a one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage. Ubisoft will then have the ability to license out to third-parties the cloud streaming rights to Activision’s games under any business model of its choosing, including buy-to-play, multigame subscription services, or any other model that may arise. Ubisoft will also be able, for a fee, to require Microsoft to adapt Activision’s titles to operating systems other than Windows, such as Linux, if it decides to use or license out the cloud streaming rights to Activision’s titles to a cloud gaming service that runs a non-Windows operating system.
"This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition...
“
Sarah Cardell, Chief Executive of the CMA, said: "The CMA has today confirmed that Microsoft’s acquisition of Activision, as originally proposed, cannot proceed.
"Separately, Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously. As part of this new deal, Activision’s cloud streaming rights outside of the EEA will be sold to a rival, Ubisoft, who will be able to license out 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. We will now consider this deal under a new Phase 1 investigation.
"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. Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice."
"We believe that this development is positive for players, the progression of the cloud game streaming market, and for the growth of our industry," Smith added. "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. Today’s development brings us one step closer to bringing the joy of gaming to players everywhere."
Ubisoft said the deal will "further strengthen Ubisoft’s content offering through its subscription service Ubisoft+, as well as allowing Ubisoft to license streaming access of the Activision Blizzard catalogue of games, including future releases, to cloud gaming companies, service providers, and console makers".
"Ubisoft+ will be able to further expand its growing library of titles enabling players the ability to play across multiple platforms including PC, Xbox consoles and Amazon Luna with a single subscription to Ubisoft+ Multi Access, and on the PlayStation platform with Ubisoft+ Classics."
The CMA is the last obstacle Microsoft must navigate in order to get the deal signed. The CMA originally said no to the deal, but the Competition Appeal Tribunal (CAT) paused Microsoft's appeal against the decision to allow it and the CMA to negotiate a new proposal.
Microsoft and Activision Blizzard then postponed their merger deadline for three months to allow more time for the deal to gain approval from the CMA. Microsoft must therefore complete its acquisition of Activision Blizzard by October 18 or pay several billion dollars in a reverse termination fee.
The CMA's new merger inquiry launches today, August 22, with an invitation to comment period set to end September 1. The deadline for an initial decision is October 18. That's the same day Microsoft's 90-day extension in its buyout agreement with Activision Blizzard expires. Microsoft said it "anticipates" the CMA review process can be completed beforehand.
Games industry analyst at Ampere, Piers Harding-Rolls told IGN that Microsoft's announcement was an "unexpected development" that represents a "fairly radical" attempt to satisfy the concerns of the CMA. The implications of the divesting of streaming rights to Ubisoft are "wide-ranging".
"The deal promises to make Ubisoft+ more appealing to audiences and will enable Ubisoft to scale the service more rapidly and help reduce churn, which has been on ongoing challenge for the company," Harding-Rolls said.
"It is not clear if Ubisoft+, or any other multi-game subscription streaming services that Ubisoft licenses to, will get access to day-and-date releases of new games and if that will be commercially viable. It may be that day-one releases of Activision titles via Game Pass are download-only and that streaming versions will follow later.
"The deal only gives Ubisoft non-exclusive rights to stream Activision games in the European Economic Area, which means that the commercial arrangements for streaming Activision games will differ between the EEA and other regions. It’s a bit ironic that most of the streaming rights will now reside with a European company considering the ECs aim to open up the cloud gaming market and support its local companies.
"Microsoft’s willingness to do this deal suggests that the company is aware that streaming of games is likely to remain a value-added and small part of how games are distributed and consumed over the next 10 years; it’s more important to build out its portfolio of games through the acquisition than hang on to the streaming rights."
In an email to staff, Activision Blizzard boss Bobby Kotick admitted "this has been a longer journey than expected", but insisted "nothing substantially changes with the addition of this divestiture".
Comment (571)
Related posts
Minecraft: Java & Bedrock Edition
Tue, 22 Aug
buMTsgdWoRj
ATRhOBlxfSDCEiZ
Reply