Microsoft and Activision Blizzard restructure acquisition to address CMA concerns

Microsoft first announced its intentions to acquire Activision Blizzard in 2022. Since then, the road to closing the deal has been a long, sinuous one. The megacorporation has faced pushback from several sources, including Sony. The competitor argues that the acquisition would be anti-competitive, especially if franchises like Call of Duty become Xbox and PC exclusives. Some governing bodies have also stepped in, now prompting Microsoft to revisit its initial agreement.

Previously, Microsoft claimed it was committed to keeping Call of Duty on PlayStation, at least for the next 10 years. The UK’s Competition and Markets Authority (CMA) also voted to block the buyout, driving the companies to push back the merger deadline to October 18. Initially, the CMA made its case against the deal over Microsoft’s potential monopolization of cloud game streaming. To appease the CMA, Microsoft has decided to give Ubisoft a piece of the cloud game streaming pie.

Microsoft intends for Ubisoft to compensate it “for the cloud streaming rights to Activision Blizzard’s games through a one-off payment and through a market-based wholesale pricing mechanism.” Ubisoft could also offer Activision Blizzard games to cloud services running non-Windows operating systems.

Microsoft restructures its agreement to include Ubisoft

The proposed changes would, in theory, limit Microsoft’s ability to monopolize cloud game streaming. According to vice chair and president Brad Smith, the company would “not be in a position either to release Activision Blizzard games exclusively on its own cloud streaming service – Xbox Cloud Gaming – or to exclusively control the licensing terms of Activision Blizzard games for rival services.”

Navigating cloud streaming rights remains tricky for Microsoft, as it has several preexisting commitments in place. The company currently maintains obligations to “provide cloud streaming rights in the European Economic Area”. Currently, Microsoft holds contractual agreements with cloud streaming providers such as Nvidia, Boosteroid, Ubitus, and Nware.

The merger agreement expired in July, though it received that 90-day extension. Nevertheless, Microsoft and Activision Blizzard continue to make headway slowly, and the “transaction is now in a position to move forward in more than 40 countries”. If completed, the $68.7 billion acquisition will be the most expensive in gaming history by a significant margin.