EU Regulators approve Microsoft's $68.7 billion acquisition of Activision Blizzard with conditions on cloud gaming
Microsoft's $68.7 billion acquisition of Activision Blizzard has received the green light from EU regulators, marking a significant milestone in the tech giant's expansion plans. The European Commission has approved the deal, albeit with certain conditions related to cloud gaming. In contrast, UK regulators raised concerns about competition in the cloud gaming market, leading to the blockage of the acquisition in the region, as we reported less than a month ago.
The EU's approval was based on the understanding that Microsoft would have no motivation to withhold Activision's games from Sony, and that excluding PlayStation from accessing these games would not have a substantial impact on the consoles market. However, EU regulators did identify potential competition issues regarding the distribution of PC and console games through cloud gaming services (specifically due to the Xbox Cloud Gaming platform).
To address these concerns, Microsoft has offered 10-year licensing deals to competitors, ensuring that the distribution of PC and console games through cloud gaming services remains fair and competitive. As part of this agreement, consumers in EU countries will receive a free license to stream Activision Blizzard games on any cloud game streaming service of their choice, while cloud providers will also receive a free license to stream these games in EU markets (Including Call of Duty). Notably, the European Commission has requested Microsoft to extend this automatic license globally.
While the EU's approval is a positive development for Microsoft, the company still faces hurdles in the UK. The Competition and Markets Authority (CMA) blocked the acquisition, citing concerns about reduced innovation and choice for UK gamers in the cloud gaming market. Microsoft is appealing the CMA's decision and aims to overturn the ruling. In an effort to address regulatory concerns around cloud gaming, Microsoft has forged partnerships with Boosteroid, Ubitus, Nvidia, and Nintendo.
Beyond Europe, regulatory approval for the deal has been granted in several countries, including Saudi Arabia, Brazil, Chile, Serbia, Japan, and South Africa. However, China, South Korea, New Zealand, and Australia are still reviewing the acquisition, and have probably been waiting to hear the decisions of both bodies, the CMA and the EU. In the United States, the Federal Trade Commission (FTC) has filed a lawsuit to block the deal, and the case is currently ongoing.
In the wake of the EU approval, Activision Blizzard has expressed its intention to expand its investment and workforce throughout the European Union. However, the CMA remains steadfast in its defense of the decision to block the merger, emphasizing that the acquisition would harm competition in the cloud gaming sector and replace a free and competitive market with a regulated one. Microsoft's appeal against the CMA's ruling promises to be a challenging legal battle, despite the approval received from the European Commission.
Our take: This ongoing saga appears far from reaching its resolution. However, with the approval from the EU regulators, Microsoft has been thrown a much-needed lifeline to keep the deal afloat. The upcoming appeal process at the CAT against the CMA will undoubtedly be closely watched, as it seems the CMA is left without a significant ally (The EU) supporting its decision, apart from the FTC in the United States. Nevertheless, the FTC's legal limitations may not be favorably aligned for a potential trial. As the drama continues to unfold, only time will tell how this intricate legal battle will ultimately unfold and shape the future of the gaming industry.