Activision Blizzard (ATVI.O), the company that makes the “Call of Duty” games, will sell its streaming rights to Ubisoft Entertainment (UBIP.PA) in a new move to get Britain’s anti-trust regulator to approve its $69 billion sale to Microsoft (MSFT.O).
Before noon in New York, shares of Activision were up 1.1%, and shares of Microsoft were up 0.7%. The pan-European STOXX 600 (.STOXX) index finished up 8.8%, with Ubisoft shares being the biggest winner.
Early in 2022, Microsoft announced the biggest gaming deal in history. Britain’s competition regulator blocked the transaction out of concern that the U.S. computer behemoth would dominate the nascent cloud gaming sector.
After months of back and forth, the Competition and Markets Authority (CMA) said on Tuesday that it had stuck to its original decision to kill the deal, causing Microsoft to come up with new terms.
Under the new deal, Microsoft won’t be able to release Activision games like “Overwatch” and “Diablo” entirely on its own cloud streaming service, Xbox Cloud Gaming, or control the licensing terms for rival services.
Instead, Activision’s French competitor, Ubisoft, will buy the cloud streaming rights to all of Activision’s PC and mobile games, as well as any new games it makes in the next 15 years. That will be true everywhere, except in Europe, where the original deal has already been accepted by Brussels. Ubisoft will get a non-exclusive deal for Activision’s rights in Europe, which will let it sell these games there as well.
Ubisoft to Challenge Microsoft in Cloud Gaming
The CMA said that if Microsoft wanted to use Activision’s games on its own Xbox cloud platform outside the European Economic Area, it would have to get a license from Ubisoft.
EU antitrust officials are looking into how Microsoft’s plan to get approval from the UK would affect the concessions it made to the European Commission, a spokeswoman said.
Tom Smith, a partner at the law firm Geradin Partners and a former legal director at the CMA, said that the deal seemed likely to go through now. He told Reuters, “The process has been painful, and there’s still a chance that the wheels could fall off, but we shouldn’t expect Big Tech deals to go smoothly these days.”
Microsoft said on Tuesday that it thought its new plan was “substantially different” and that it expected the CMA to look at it by October 18.
The CMA said that it would look at the new deal in the usual way, with Phase 1 finishing on October 18. If the CMA is still worried about how it will affect competition, it could start a much longer Phase 2 review.
After the regulatory process took longer than expected, the two American companies have already pushed back the date for the deal by three months, to October 18.
UK law firm Fladgate competition lawyer Alex Haffner said Microsoft wouldn’t have taken this extra step if it didn’t think it could persuade the British regulator to accept the new arrangement by Oct. 18.
COMPETITION THAT WORKS
Sarah Cardell, the head of the CMA, said that the UK’s regulator would now look closely at the new deal and might even ask what other people think.
“Our goal hasn’t changed,” she said in a statement. “Any future decision on this new deal will make sure that the growing cloud gaming market will continue to benefit from open and effective competition that drives innovation and choice.”
The CMA will say that Microsoft’s big compromise shows that its tough approach to tech deals has worked since Britain left the European Union and it became a separate regulator.
Competition lawyers, on the other hand, have said that the deal and the back-and-forth with Brussels have made the regulatory environment much less clear.
The US Federal Trade Commission also didn’t like the deal, but it hasn’t been able to stop it. The European Union, on the other hand, let it go after Microsoft promised to let other platforms use Activision’s games.
In April, the CMA said it would stop the deal and was getting ready to go to court to defend its decision.
But it took the unusual step of reopening its investigation in July after Microsoft said that commitments accepted by the European Union and a new deal with Sony were a “material change.”
The CMA said on Tuesday that after reviewing the changes, it still didn’t like them and would block the original deal, forcing the U.S. company to come back with its new terms.
Microsoft claimed Ubisoft would buy the rights for a one-time payment and a market-based wholesale price system that incorporates usage-based charges.
Paris-traded Ubisoft shares rose roughly 10% at 1430 GMT.