We’re thrilled to announce the return of GamesBeat Next, hosted in San Francisco this October, where we will explore the theme of “Playing the Edge.” Apply to speak here and learn more about sponsorship opportunities here. At the event, we will also announce 25 top game startups as the 2024 Game Changers. Apply or nominate today!
The United Kingdom’s antitrust agency has finally given preliminary approval to Microsoft’s $68.7 billion acquisition of Activision Blizzard.
The Competition and Markets Authority issued a statement today saying it has give preliminary approval. The next step is for the CMA to gather third-party feedback, after which the CMA will reach a final decision. That means the merger is all but a done deal, after a regulatory process that involved an antitrust trial in the U.S. The companies originally proposed the merger in January 2022.
In a statement, Activision Blizzard said, “The CMA’s preliminary approval is great news for our future with Microsoft. We’re pleased the CMA has responded positively to the solutions Microsoft has proposed, and we look forward to working with Microsoft toward completing the regulatory review process.”
While other agencies around the world approved the deal, the CMA was concerned about the potential for Microsoft to dominate the cloud-gaming market. Today, the CMA said, “The sale of Activision’s cloud gaming rights to Ubisoft substantially addresses previous concerns and opens the door to the deal being cleared, the CMA said today.”
GamesBeat Next 2023
Join the GamesBeat community in San Francisco this October 24-25. You’ll hear from the brightest minds within the gaming industry on latest developments and their take on the future of gaming.
Microsoft’s president, Brad Smith, said in a statement, “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, Sarah Cardell, CEO of the CMA, said in a statement, “The CMA’s position has been consistent throughout – this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved. In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns.”
She added, “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.”
While the CMA has identified limited residual concerns with the new deal, the agency said Microsoft has put forward remedies which the CMA has provisionally concluded should address these issues. The CMA said it considers that the restructured deal makes important changes that substantially address the concerns it set out in relation to the original transaction earlier this year.
It also said, “In particular, the sale of Activision’s cloud streaming rights to Ubisoft will prevent this important content – including games such as Call of Duty, Overwatch, and World of Warcraft – from coming under the control of Microsoft in relation to cloud gaming. The CMA originally found that Microsoft already has a strong position in cloud gaming services and could have used its control over Activision content to stifle competition and reinforce this position.”
The CMA’s words
Here’s an excerpt from the ruling:
Earlier this year, the CMA blocked Microsoft from acquiring the whole of Activision due to concerns that the deal would harm competition in cloud gaming in the UK. After that deal was blocked, Microsoft submitted a restructured transaction in August for the CMA to review.
Under that new deal, Microsoft will not purchase the cloud gaming rights held by Activision, which will instead be sold to an independent third party, Ubisoft Entertainment SA (Ubisoft), before the deal is completed.
The prior sale 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.
In contrast to the original deal, Microsoft will no longer control cloud gaming rights for Activision’s content, so would not be in a position to limit access to Activision’s key content to its own cloud gaming service or to withhold those games from rivals. Unlike the remedies the CMA previously rejected, Ubisoft will be free to offer Activision’s games both directly to consumers and to all cloud gaming service providers however it chooses, including for buy-to-play or multigame subscription services, or any new model for providing content that might emerge as the market develops. 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.
A powerhouse at last?
Now the companies will become a powerhouse of the gaming industry. Microsoft has properties like Halo, Forza, Flight Simulator, Doom, Gears of War, Elder Scrolls, Starfield, Fallout and more. While Activision Blizzard has the dominant shooter game in the world, Call of Duty, as well as Crash Bandicoot, World of Warcraft, StarCraft, Overwatch, Hearthstone, and more.
Activision Blizzard CEO Bobby Kotick sent the following email to employees:
I want to share an important update on our planned merger with Microsoft.
Today the UK regulatory authority, the CMA, issued a preliminary approval of our merger with Microsoft based on the solutions Microsoft presented in connection with its new merger application. This approval is critical to completing our merger.
The next step is for the CMA to gather third-party feedback, after which the CMA will reach a final decision.
As I said when we announced the deal, this transaction will help us accelerate our ambitions for the future of gaming and enable us to better serve our players. Microsoft recognizes the commitment to excellence and creative independence that has served us well for the last 30 years. I am confident that their resources, technology, and tools will provide us even greater opportunities to create even better games.
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 regulators continue their process, I will keep you updated on our progress towards our expected closing.
GamesBeat’s creed when covering the game industry is “where passion meets business.” What does this mean? We want to tell you how the news matters to you — not just as a decision-maker at a game studio, but also as a fan of games. Whether you read our articles, listen to our podcasts, or watch our videos, GamesBeat will help you learn about the industry and enjoy engaging with it. Discover our Briefings.