Microsoft cleared to buy Call of Duty maker Activision Blizzard

Source: BBC

Microsoft’s revised offer to buy Call of Duty-maker Activision Blizzard has been approved by UK regulators.

The Competition and Markets Authority said the deal addressed its concerns, after the watchdog blocked the original $69bn (£59bn) bid in April.

The green light marks the culmination of a near two-year fight to secure the gaming industry’s biggest-ever takeover.

But despite approving the takeover, the CMA criticised Microsoft’s conduct.

After the competition watchdog blocked the takeover earlier this year, Microsoft’s president Brad Smith hit out at the CMA’s decision, which it said was “bad for Britain”.

CMA chief executive, Sarah Cardell, said: “Businesses and their advisors should be in no doubt that the tactics employed by Microsoft are no way to engage with the CMA.

“Microsoft had the chance to restructure during our initial investigation but instead continued to insist on a package of measures that we told them simply wouldn’t work. Dragging out proceedings in this way only wastes time and money.”

Under the re-worked deal, Microsoft will hand the rights to distribute Activision’s games on consoles and PCs over the cloud to French video game publisher Ubisoft.

But while a concession has been made, Microsoft will still control games such as Call of Duty, World of Warcraft, and Candy Crush that will provide the firm with huge revenues.

The CMA said the revised deal, which paves the way for the transaction to be finalised globally, would “preserve competitive prices” in the gaming industry and provide more choice and better services.

It has proved controversial and received a mixed response from regulators around the world, but has already been passed by regulators in the European Union. The US competition watchdog recently saw its attempt to pause the purchase rejected by the courts.

But the CMA’s Ms Cardell said with the sale of Activision’s cloud streaming rights to Ubisoft, which makes Assassin’s Creed, “we’ve made sure Microsoft can’t have a stranglehold over this important and rapidly developing market”.

“We take our decisions free from political influence and we won’t be swayed by corporate lobbying,” she added.

‘Final hurdle crossed’

Mr Smith said Microsoft was “grateful for the CMA’s thorough review and decision”.

He said the “final regulatory hurdle” had been crossed for the tech giant to complete the deal, while a spokesman for Activision Blizzard said the approved deal was “great news”.

Microsoft is paying cash for Activision at a premium price of $95 per share, meaning the chief executive of the World of Warcraft maker, Bobby Kotick, is set for a $400m payday, with chairman Brian Kelly earning $100m, based on the shares they own.

Under the restructured agreement, Microsoft has agreed to transfer the rights to stream Activision games from the cloud to Ubisoft for 15 years outside the European Economic Area (EEA). This includes EU countries as well as Iceland, Liechtenstein and Norway.

After the 15 years is up, Ubisoft will no longer hold the cloud gaming rights for Activision’s content, but it is understood the regulator believes the time span will see rivals become established for the cloud gaming market to be more competitive.

Microsoft remains hopeful the takeover will boost demand for its Xbox console and enable the tech firm to add more titles to itsXbox Game Pass service, where members pay a subscription fee to access a catalogue of games from the cloud – either by downloading or by streaming.

The deal with Activision also means Microsoft will own its studio solely purposed for mobile games, with hopes of expanding on the successes of titles such as Candy Crush.

The takeover marks a huge shift for the games industry. It further cements Microsoft as a video game giant, which could catapult it ahead of Nintendo to become the third-biggest player in the industry behind Sony, the owner of the PlayStation console, and market leader Tencent.

Sony strongly opposed this deal over concerns that big Activision titles like Call of Duty could become Xbox exclusives over time.

The PlayStation currently outsells Microsoft’s Xbox but like all entertainment platforms, the key to success is access to the best content.

Sony is also not averse to buying up successful studios. But Activision Blizzard is in a league of its own, and Microsoft knows that.

‘More choice’

Nicky Stewart, a consultant and former commercial director of cloud services provider UK Cloud, said the decision to approve the takeover was “great news for gamers”.

“[It will lead to] more choice, more innovation, better value and improved gaming experiences and a healthy, competitive market.

“The CMA has forced Microsoft to make concessions in the UK that other regulators have not. This is good news for the UK’s nascent gaming industry,” said Ms Stewart, who is also a former head of ICT at the Cabinet Office government department.

Following eight years in development and much anticipation, another large studio called Bethesda, which is owned by Microsoft launched its new game Starfield in 2023 – but only on Xbox and PC.

After the CMA rejected Microsoft’s first attempt to acquire Activision, the two companies hit out at the watchdog, saying its initial decision had contradicted “the ambitions of the UK to become an attractive country to build technology businesses”.

The CMA’s Ms Cardell told the BBC: “We were clear that that deal couldn’t go ahead, because it would have harmed competition, and that would have been bad for UK gamers.

“We stood our ground. We were prepared to defend that decision in court, but Microsoft came forward with a major concession.”

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