“Call of Duty” maker Activision Blizzard (NASDAQ:ATVI) will sell its streaming rights to Ubisoft Entertainment in a fresh attempt to win approval from Britain’s anti-trust regulator for its $69 billion sale to Microsoft (NASDAQ:MSFT).
Microsoft had announced the biggest gaming deal in history in early 2022, but the acquisition was blocked by Britain’s competition regulator, which was concerned that the American computing giant would gain too much control of the nascent cloud gaming market.
After months of back-and-forth, the Competition and Markets Authority (CMA) said on Tuesday it had stuck by its original decision to veto the deal, forcing Microsoft to come forward with new terms.
Under the restructured deal, Microsoft will not be able to release Activision games like “Overwatch” and “Diablo” exclusively on its own cloud streaming service — Xbox Cloud Gaming – or to exclusively control the licensing terms for rival services.
Instead, French gaming rival Ubisoft will acquire the cloud streaming rights for Activision’s existing PC and console games and any new games released by Activision in the next 15 years. That will apply globally but not in Europe, where Brussels had already accepted the original deal.
In Europe, Ubisoft will get a non-exclusive license for Activision’s rights to enable it to offer those games in that region too.
Microsoft said on Tuesday it believed its new proposal was “substantially different” and it expected it to be reviewed by the CMA by Oct. 18.
The CMA said it would examine the new deal under its usual system, with a Phase 1 process ending on Oct. 18. If it still has concerns about the impact on competition, the CMA could open a much longer Phase 2 examination.
Alex Haffner, competition partner at UK law firm Fladgate, said he did not believe Microsoft would have taken this step if it did not believe it would be able to get the new terms past the British regulator by Oct. 18.
EFFECTIVE COMPETITION
CMA Chief Executive Sarah Cardell said the UK regulator would now look closely at the new deal, including seeking the thoughts of third parties.
“Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice,” she said in a statement.
The major concession by Microsoft – which could have offered a similar remedy during the original inquiry – marks a win for Britain’s CMA, which has taken a tough approach to tech deals since it became a standalone regulator following Britain’s departure from the European Union.
The Federal Trade Commission in the United States also opposed the deal, but it has failed in its bids to block it. The European Union, however, waved it through after accepting Microsoft’s commitments to license Activision’s games to other platforms.
The CMA first said it would block the deal in April and was preparing to go to court to defend its case.
However, it took the rare step of reopening its investigation in July after Microsoft said commitments accepted by the European Union and a new agreement with Sony (NYSE: SONY) constituted a material change.
The CMA said on Tuesday that, having reviewed those changes, it still did not accept them and would block the original deal, forcing the U.S. giant to come back with its new terms.
“We won’t know until the beginning of October if these stringent new rules will allow Microsoft to leap over this latest British regulatory hurdle, but it certainly seems as though significant compromise may have been reached,” Hargreaves analyst Susannah Streeter said.
Microsoft said Ubisoft would acquire the rights through a one-off payment and a market-based wholesale pricing mechanism, including an option that supports pricing based on usage.
Ubisoft’s shares listed in Paris were up more than 7% at 0950 GMT, making them the top gainer on the pan European STOXX 600 index.
