Microsoft has announced it is restructuring its acquisition of Activision Blizzard to address concerns raised by the UK’s Competition and Markets Authority (CMA), about the impact of the proposed $69 billion acquisition deal on cloud game streaming. In the new deal, Microsoft will sell off Activision’s cloud gaming rights to Ubisoft video game company.
This comes after the two companies agreed to extend their merger agreement to October 18th after missing the original transaction deal. According to Microsoft’s Vice Chair and President, Brad Smith, “the extension would provide ample time to work through final regulatory concerns.”
The restructured transaction will have the streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years transferred to Ubisoft Entertainment. The new deal will see Microsoft acquire a narrower set of rights which the company believes “presents a substantially different transaction under UK law than the previous acquisition deal submitted to the CMA for consideration in 2022.”
Under the restructured deal, Microsoft will not be able to release Activision Blizzard games exclusively on Xbox cloud gaming. In addition, it won’t have exclusive control over the licensing terms of Activision Blizzard games for rival services either. Ubisoft will instead commercialize gaming rights across cloud streaming services worldwide (including Microsoft) and will compensate Microsoft for the cloud streaming rights to Activision Blizzard’s games. Ubisoft will also offer Activision Blizzard’s games to cloud gaming services running non-Windows operating systems.
Microsoft has already notified the CMA of the restructured transaction with the hopes that the regulatory body’s review processes can be completed before the 90-day extension agreement with Activision Blizzard expires.
The UK’s Competition and Markets Authority (CMA) response
The UK’s Competition and Markets Authority (CMA) had previously blocked the original transaction back in April citing concerns that the “deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”
The CMA has since commenced phase 1 investigation into the newly restructured deal and has issued a final directive on the original merger. According to a statement released by the CMA, has decided to block the original merger after rejecting submissions by Microsoft to revisit its original decision.
Chief Executive of the CMA, Sarah Cardell, has pointed out that this is not a green flag and the body will “carefully” and “objectively” assess the details of the restructured deal and its impact on competition. Sarah Cardell further adds, “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.”
The CMA’s decision as dictated by the statutory deadline is expected by October 18, 2023.