Microsoft and Activision sell streaming rights to secure the biggest video game deal

LONDON (Reuters) – Call of Duty maker Activision Blizzard (ATVI.O) will sell the streaming rights to Ubisoft Entertainment (UBIP.PA) in a fresh bid to win approval from Britain’s antitrust authority for $69. Selling $1 billion to Microsoft Corporation (MSFT.O).

Activision shares were trading up 1.1%, while Microsoft shares were up 0.7% before noon in New York. Shares of Ubisoft listed in Paris closed up 8.8%, the biggest gainer on the European Stoxx 600 index.

Microsoft announced the largest gaming deal in history in early 2022, but the acquisition was blocked by Britain’s competition regulator, which was concerned that the US computing giant would gain too much control over the emerging cloud gaming market.

After months of indecision, the Competition and Markets Authority (CMA) said on Tuesday that it stood by its original decision to veto the deal, forcing Microsoft to move forward with new terms.

Under the restructured deal, Microsoft will not be able to release Activision games like “Overwatch” and “Diablo” exclusively on its cloud streaming service – Xbox Cloud Gaming – or exclusively control licensing terms for competing services.

Instead, French gaming competitor Ubisoft will acquire the cloud streaming rights to Activision’s existing PC and console games, and any new games Activision releases in the next 15 years.

This will apply globally but not in Europe, where Brussels has already accepted the original agreement. In Europe, Ubisoft will acquire a non-exclusive license of the rights to Activision to enable it to offer these games in that region as well.

The CMA said Microsoft would need to license the rights to Activision games from Ubisoft for its Xbox cloud platform outside the European Economic Area.

An EU spokesperson said that EU antitrust regulators are studying whether Microsoft’s proposal for UK approval would affect its concessions to the European Commission.

Tom Smith, a partner at law firm Geradin Partners and former CMA legal director, said it now appears the deal is closing. “The process has been arduous, and there is still room to move forward, but we should not expect major technology deals to continue for the time being,” he told Reuters.

Microsoft said on Tuesday that it believes its new proposal is “significantly different” and expects the CMA to review it by October 18.

The Capital Markets Authority said it would examine the new deal under its usual regime, with the first-stage process ending on October 18. And if it still has concerns about the impact on competition, the CMA can open a much longer second-stage examination.

The two US companies have already extended the deadline for the deal – pushing it back by three months to October 18 – after the regulatory process took longer than expected.

Alex Haffner, competition partner at UK law firm Fladgate, said he didn’t think Microsoft would have taken this new step if it didn’t think it would be able to pass the new deal through the British regulator by October 18.

effective competition

Sarah Cardell, chief executive of the Capital Markets Authority, said the UK regulator would now look closely at the new deal, including soliciting ideas from third parties.

“Our goal has not changed – any future decision on this new transaction will ensure that the growing cloud gaming market continues to benefit from open and efficient competition that drives innovation and choice,” it said in a statement.

The CMA will argue that Microsoft’s massive concession shows the success of its tough approach to technology deals since becoming an independent regulator after Brexit.

However, competition lawyers argued that the falling out with Brussels and disagreements over the deal had introduced significant uncertainty to the regulatory landscape.

The US Federal Trade Commission also opposed the deal, but failed in its efforts to block it. However, the EU waved this off after accepting Microsoft’s obligations to license Activision’s games to other platforms.

The Capital Markets Authority said for the first time that it would block the deal in April, and is preparing to go to court to defend its case.

However, it took the rare step of reopening its investigation in July after Microsoft said the commitments accepted by the EU and the new agreement with Sony marked a fundamental change.

The Capital Markets Authority said on Tuesday that, after reviewing these changes, it still did not accept them and would block the original deal, forcing the US giant to return on its new terms.

Microsoft said Ubisoft will acquire the rights through a one-time payment and a market-based wholesale pricing mechanism, including an option that supports usage-based pricing.

Shares of Paris-listed Ubisoft were up about 10% by 1430 GMT.

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