Microsoft (NASDAQ:MSFT), the Xbox owner led by President Brad Smith, has completed its $69 billion acquisition of Activision Blizzard (NASDAQ:ATVI), the producer of popular games such as Diablo and Call of Duty. The deal, which faced opposition from the UK's Competition and Markets Authority (CMA), was given an unexpected green light.
The approval came after a revised proposal in August 2023, which saw Microsoft agreeing not to acquire cloud rights for Activision's existing and future games over a 15-year period. Instead, these rights will be transferred to Ubisoft Entertainment. This move was aimed at preventing Microsoft from dominating the rapidly expanding cloud gaming market and enabling Ubisoft to distribute Activision’s content via diverse business models, including multigame subscription services.
To address the CMA's concerns about Microsoft gaining an excessive advantage over rivals like Sony (NYSE:SONY) PlayStation, Microsoft is transferring Activision Blizzard's cloud gaming rights to Ubisoft. In return, Ubisoft will compensate Microsoft via an option supporting pricing based on usage and a one-time payment. This arrangement allows Ubisoft to serve these games on non-Windows cloud services.
Sarah Cardell, Chief Executive of the UK CMA, underscored that this intervention would stimulate competitive pricing, improved services, and broader consumer choice. The CMA had previously blocked an all-cash deal between Microsoft and Activision in April due to concerns over potential stifling of the cloud gaming market.
With this latest development, Microsoft has overcome a significant hurdle in its acquisition journey following approvals from EU and US regulatory bodies. However, it marks a significant change in the gaming industry landscape as it addresses fears of market dominance while promoting competition and consumer choice.
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