On Tuesday, Microsoft presented a new agreement to the U.K.'s Competition and Markets Authority (CMA) after its initial offer was denied. The CMA confirmed it had rejected the first deal. As part of the restructured agreement, Microsoft will not acquire the cloud rights of Activision's PC and console games, or for titles it will bring out in the following 15 years.
On Tuesday Microsoft offered concessions on their original proposal for the acquisition of Activision Blizzard, which had been rejected by U.K. regulators. The U.S. technology giant had initially put the $69 billion deal forward in January 2022, however it faced challenges from U.S., European and U.K. authorities. The U.K.'s Competition and Markets Authority (CMA) subsequently declared the deal blocked. Nevertheless, Microsoft and Activision had reached a restructured agreement for review by the CMA, with a decision deadline of Oct. 18. Brad Smith, Microsoft President, hoped the process could be completed prior to this date. Included in the restructuring, Microsoft will not acquire cloud rights for existing or new Activision games released in the next fifteen years, these rights to be divested to French game publisher Ubisoft Entertainment instead. Ubisoft share prices rose by over 4% in early Europe trade.
The CMA has been the most vocal in opposing the takeover, citing worries that it would reduce competition in the growing cloud gaming industry. This technology allows people to access video games through streaming services, similar to Netflix, potentially eliminating the need for expensive consoles as users could play the games on PCs, mobiles and TVs.European Union regulators were the first to approve the acquisition in May, after Microsoft offered to provide royalty-free licenses for Activision games to cloud gaming platforms for those who already purchased them. However, the CMA deemed that this would allow Microsoft to "set the terms and conditions for this market for the next ten years" and thus refused the same measure.In the U.S., the Federal Trade Commission took Microsoft to court over the Activision deal, attempting to block it. In the end, a judge overturned this effort in July, giving the green light to the transaction going through.Immediately after this decision, the CMA expressed that it was "ready to consider any proposals from Microsoft to restructure the transaction" to address its apprehensions.
The CMA has announced a restructured deal, which notably differs from the previous one, where Ubisoft will acquire Activision's cloud streaming rights outside of the EEA for licensing to any cloud gaming provider. As part of the new agreement, Microsoft will receive a one-time payment and have a market-based wholesale pricing mechanism, which includes the option for usage-based pricing. It will also grant Ubisoft the ability to deliver Activision Blizzard's games to cloud gaming services powered by non-Windows operating systems. Chris Early, senior VP of strategic partnerships and business development at Ubisoft commented to say that they are focused on providing quality experiences to their players regardless of the platform they choose to play. Sarah Cardell, CEO of the CMA, clarified that though this is a new and restructured deal, it is by no means an approval. They will still conduct a thorough and impartial assessment to measure the impact it has on competition.
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