LONDON: In a strategic move to gain approval from Britain’s anti-trust regulator for its monumental $69 billion sale to Microsoft, Activision Blizzard, the renowned creator of “Call of Duty,” has announced a groundbreaking agreement. The gaming giant will be transferring its streaming rights to Ubisoft Entertainment, a fellow powerhouse in the gaming industry.
Shares of Activision experienced a 1.1% increase in trading, while Microsoft also saw a 0.7% uptick before the noon hour in New York. Across the Atlantic, Ubisoft’s shares listed in Paris soared 8.8%, securing its position as the most substantial gainer on the pan-European STOXX 600 index.
Microsoft had sent shockwaves through the gaming world with its announcement of the largest gaming deal in history early in 2022. However, the acquisition hit a roadblock when Britain’s competition regulator expressed concerns about the US tech behemoth gaining excessive control over the burgeoning cloud gaming market.
Following months of negotiations and deliberations, the Competition and Markets Authority (CMA) reaffirmed its initial decision to block the deal. This prompted Microsoft to return to the drawing board and devise new terms to address the regulator’s concerns.
Under the revamped deal, Microsoft will no longer have the privilege of releasing popular Activision games such as “Overwatch” and “Diablo” exclusively on its own cloud streaming service, Xbox Cloud Gaming. Additionally, Microsoft will not have exclusive control over the licensing terms for competing services.
Instead, in a strategic twist, French gaming titan Ubisoft will step into the spotlight. Ubisoft will acquire the cloud streaming rights for Activision’s existing PC and console games, as well as any upcoming titles released by Activision over the next 15 years.
This transformation will apply on a global scale, with one notable exception: Europe. In Europe, the original deal was accepted by Brussels, and Ubisoft will secure a non-exclusive license for Activision’s rights. This will empower Ubisoft to offer these games within the European region as well.
EU antitrust regulators are now scrutinizing whether Microsoft’s proposal to gain approval in the UK would have an impact on its concessions to the European Commission.
Experts Weigh In
Tom Smith, a partner at the law firm Geradin Partners and a former legal director at the CMA, expressed optimism that the deal was likely to proceed. He acknowledged the complexities of the process and the potential for unforeseen challenges, but emphasized that Big Tech deals no longer sail through with ease in the current regulatory landscape.
Microsoft’s Response and Road Ahead
Microsoft, in response to these developments, stated that it firmly believed its new proposal represented a “substantially different” approach. The company expects the revised deal to undergo review by the CMA by October 18.
The CMA, in turn, announced its intention to assess the new deal within its established framework. The Phase 1 process is set to conclude on October 18. If concerns about competition persist, the CMA retains the option to initiate a more extensive Phase 2 examination.
Reflecting on the situation, Alex Haffner, a competition partner at UK law firm Fladgate, shared his belief that Microsoft’s decision to pursue this new path was indicative of its confidence in securing approval from the British regulator by the specified date.
Sarah Cardell, Chief Executive of the CMA, emphasized the regulator’s commitment to examining the revised deal meticulously. She highlighted the importance of ensuring that the rapidly growing cloud gaming market remains a landscape of vibrant competition, fostering innovation and affording consumers a range of choices.
Significance of the CMA’s Approach
The CMA’s staunch stance in demanding concessions from Microsoft is seen by many as a testament to its unwavering dedication to regulating the tech industry. Since becoming an independent regulator following Britain’s departure from the European Union, the CMA has consistently taken a stringent approach to overseeing tech-related deals.
However, experts in the field of competition law have pointed out that the divergence between the CMA’s stance and that of Brussels, along with the fluctuations in the deal’s progress, have introduced a considerable amount of uncertainty into the regulatory landscape. While the Federal Trade Commission in the United States also opposed the deal, its efforts to thwart it ultimately failed. Conversely, the European Union granted its approval after Microsoft made commitments to license Activision’s games to other platforms.
The CMA first unveiled its intention to block the deal back in April, indicating its readiness to defend its stance in court. The ongoing developments highlight the intricate dance between regulators, tech giants, and the ever-evolving landscape of the gaming industry.
FAQs: Activision Blizzard’s Streaming Rights Deal
What is the significance of Activision Blizzard’s streaming rights deal with Ubisoft?
Activision Blizzard’s agreement to transfer its streaming rights to Ubisoft marks a strategic maneuver to gain approval from Britain’s anti-trust regulator for its proposed $69 billion sale to Microsoft. This unique arrangement aims to address concerns about market dominance and competition in the cloud gaming sector.
Why was Microsoft’s acquisition of Activision initially blocked by the UK’s competition regulator?
Britain’s competition regulator, the Competition and Markets Authority (CMA), raised apprehensions about Microsoft’s potential control over the nascent cloud gaming market. Fearing excessive influence, the CMA originally blocked the acquisition, leading Microsoft to revisit its terms to alleviate these concerns.
What changes have been made in the revamped deal between Microsoft and Activision?
Under the restructured deal, Microsoft will no longer have exclusive rights to release Activision games, such as “Overwatch” and “Diablo,” on its own cloud streaming service, Xbox Cloud Gaming. Furthermore, Microsoft won’t maintain sole control over the licensing terms for competing services. Instead, Ubisoft will gain cloud streaming rights for Activision’s existing and upcoming games over the next 15 years.
Why is Ubisoft acquiring the cloud streaming rights from Activision?
Ubisoft’s acquisition of Activision’s cloud streaming rights presents a strategic opportunity for Ubisoft to expand its presence in the gaming industry. This deal allows Ubisoft to tap into the existing and upcoming game catalog of Activision, enhancing its offerings and strengthening its competitive position in the market.
How does the European Union’s acceptance of the deal differ from the UK’s decision?
The European Union approved the original deal between Microsoft and Activision, considering Microsoft’s commitments to license Activision’s games to other platforms. This approval stands for Europe, allowing Ubisoft to acquire non-exclusive licenses to offer these games in the region. However, the UK’s CMA blocked the deal initially due to concerns about competition. The recent restructuring of the deal is aimed at addressing these concerns specifically in the UK market.