The European Union has approved the $69 billion Activision deal from Microsoft – BBC News

  • By Stephen Powell
  • Gaming reporter

image source, Getty Images

EU regulators have approved Microsoft’s $69 billion (£55 billion) bid to buy Call of Duty publisher Activision Blizzard.

The European Commission (EC) said Microsoft had addressed its concerns about competition issues.

It comes three weeks after the UK blocked the deal over concerns it would hurt competition in the emerging cloud gaming space.

The proposed takeover is expected to be the largest deal in the history of the Games but has divided global regulators.

For the deal to pass through Microsoft, Activision needs approval from regulators in the UK, EU and US.

The US Federal Tracking Commission sued in December to block the deal — a judge’s decision is unlikely before the end of the year.

The European Commission approved the acquisition, saying that Microsoft’s offer of free 10-year licensing deals — which promise European consumers and cloud game streaming services access to Activision’s PC and console games — means there will be fair competition in the market.

“The commitments fully address the competition concerns identified by the Commission and represent a significant improvement for cloud gaming compared to the current situation,” the EU competition watchdog said in a statement.

It said an in-depth market investigation indicated that Microsoft “would not be able to harm competing consoles and competing multi-game subscription services”.

It said that cloud game streaming service providers “have given positive feedback and shown interest in licensing,” with some already entering into agreements with Microsoft based on their proposals.

Big obstacles

In response to the European Commission’s statement, the CEO of the Capital Markets Authority, Sarah Kardel, said they stand by their decision.

“Microsoft’s proposals, accepted today by the European Commission, will allow Microsoft to define the terms and conditions for this market for the next 10 years,” it added.

“They will replace a free, open, and competitive market with one that is constantly regulated for the games you sell to Microsoft, the platforms you sell to Microsoft, and the terms of sale.

“This is one of the reasons why the Independent Commission Group of the Capital Markets Authority rejected Microsoft’s proposals and blocked this deal.”

Cloud gaming – is it the future?

The deal is significant for Microsoft, which is trying to catch up with its main competitors, Sony. They have been the more successful of the two in recent years when it comes to sales in the console market.

However, this huge investment from Microsoft can be seen as a play on the future of gaming rather than its present. Microsoft is betting big on its Gamepass service, which can best be described as a gaming Netflix.

They believe the future lies in players getting subscriptions to libraries rather than making one-time purchases – which is the dominant way to access games at the moment.

Their Gamepass offering is compelling but lacks the scale and caliber of new titles to completely change how most people play. This deal will give it control of some of the most popular games in the world such as Call of Duty, World of Warcraft and Overwatch. Taking charge of such titles could be a huge boost to the service.

Cloud gaming is an extension of this principle that allows people to stream their game to any device they own – from a phone to a high-end console or PC. Just like watching Amazon Prime or Disney + but with video games.

This is currently a small and emerging part of the gaming industry due to the technological requirements to make it work. However, it appears to be increasing with the number of people playing this way in the UK tripling between 2021 and 2022 according to the CMA.

Microsoft has invested in this area and so, along with its Gamepass offering, is well positioned to lead the way, should cloud gaming continue to become an important part of the industry.

This is why the Capital Markets Authority decided to block the decision in the UK, arguing that it would put Microsoft in a very dominant position in this emerging sector.

Friction after Brexit?

“It does more to shake our confidence in the future of technology business development opportunity in Britain than we have faced before,” he said in an interview with the BBC last month.

“There is a clear message here – the EU is a much more attractive place to start a business than the UK.”

The drama is not over yet and there is a lot of money at stake. Activision Blizzard, for example, would still get $3 billion from Microsoft if the deal fell through.

The EU’s opposition stance on the mega-deal could be read by some as a reflection of post-Brexit disagreements with the United Kingdom.

Microsoft’s recent 10-year licensing agreements with cloud streaming competitors GeForce Now, Ukraine’s Boosteroid and Japan’s Ubitus are believed to have played a role in the European Commission’s decision.

Nintendo and Sony have also been promised access to keep Call of Duty on the game consoles – Switch and PlayStation. This non-exclusive Activision Blizzard game helped pave the way.

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