Microsoft closes a $69 billion Activision deal after British approval

LONDON (Reuters) – Xbox maker Microsoft closed its $69 billion deal to buy Activision Blizzard (ATVI.O) on Friday, adding to its weight in the video game market with best-selling titles including “Call of.” duty” to better compete with industry leader Sony (6758.T).

Originally unveiled in January 2022, the biggest deal in the gaming industry cleared the final big hurdle – approval from Britain – earlier today after Microsoft agreed to sell the streaming rights to Activision games to allay competition concerns.

The completion is a major win for the US tech company in its quest to attract more people to Xbox consoles and its Game Pass subscription service. Microsoft’s gaming revenue trails that of Sony, whose PlayStation consoles outsell Xbox’s.

“Today is a good day to play,” Microsoft Gaming CEO Phil Spencer said in a post on social media platform X, formerly known as Twitter. He will oversee Activision’s business, with video game publisher CEO Bobby Kotick remaining in his position until the end of 2023.

Spencer has touted the purchase as a way for Microsoft to break into the mobile gaming market worth more than $90 billion.

Activision makes popular mobile games, including “Candy Crush Saga” and “Call of Duty Mobile” – games that were excluded from the cloud streaming deal Microsoft signed with France’s Ubisoft Entertainment (UBIP.PA) to seek approval from Britain. .

“Microsoft immediately has more than $3 billion in mobile revenue,” said Michael Pachter, an analyst at Wedbush Securities.

“The big benefit is that Microsoft has a vision that they will offer games through subscription, and they need more content to give subscribers. So, this is a big step towards having enough content,” he said.

Regulatory obstacles

The deal still faces opposition from the US Federal Trade Commission, which failed in its previous attempt to block the purchase. The FTC said on Friday that it was focused on its appeal, but would “evaluate” Microsoft’s agreement with Ubisoft.

But analysts believe that will change little. “The impact of the FTC challenge will be limited to additional waivers in the future,” DA Davidson analyst Gil Loria said.

The main hurdle came from Britain’s Competition and Markets Authority, which blocked the deal in April over concerns it could give the US tech giant a stranglehold on the emerging cloud gaming market.

The deal was the biggest test of the CMA’s global strength against tech giants since Brexit.

The regulator said on Friday that “sticking to its guns” in the face of criticism of the combined companies had led to a better outcome for competition, consumers and economic growth.

The CMA said Microsoft’s concession on live streaming was a “game changer”, adding that it was the only competition agency globally to achieve this result.

She said in a statement: “The new deal will prevent Microsoft from monopolizing the competition in cloud gaming as this market takes off, while maintaining competitive prices and services for cloud gaming customers in the United Kingdom.”

The Capital Markets Authority bloc angered the merging parties, as Microsoft said that Britain was closed for business.

The British government has provided only limited support to the Capital Markets Authority, with Finance Minister Jeremy Hunt saying that although he does not want to undermine its independence, regulatory bodies also need to focus on encouraging investment.

Sarah Cardell, chief executive of the CMA, said the regulator “sent a clear message to Microsoft that the deal will be blocked unless they comprehensively address our concerns and we stand firm on this.”

She said that the Capital Markets Authority made its decisions “free from political influence” and would not be “affected by corporate pressure.”

Ben Barringer, equity analyst at Quilter Cheviot, said the CMA would see that as a victory, but should be careful not to over-regulate the technology sector.

He added: “There are concerns that the UK is a bad place to do business, and that the technology industry in particular will be closely monitoring its movements.”

The European Commission gave the green light in May when it accepted Microsoft’s commitments to license Activision games like “Overwatch” and “World of Warcraft” for other platforms.

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