EU regulators have given the go-light for Microsoft’s acquisition of Activision Blizzard in a deal for $68.7 billion, just a few weeks after regulators in the UK vetoed the acquisition. The European Commission has reached the conclusion that the transaction won’t be blocked since Microsoft made certain guarantees about cloud gaming.
The European Union came to the conclusion that Microsoft “would have no incentive to refuse to distribute Activision’s games to Sony” and that “even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market.” Both of these findings can be found in the EU’s conclusion. However, regulators in the EU found, similarly to those in the UK, that the acquisition might potentially hurt competition in the market for the distribution of PC and console games via cloud gaming services.
The European Commission has found concessions that will allow the transaction to move forward, and these concessions come in the form of 10-year licensing terms that Microsoft has granted to its rivals. These include a free license for users in EU nations that would allow them to broadcast via “any cloud game streaming services of their choice” all current and future Activision Blizzard PC and console games that they have a license for. This would encompass games that have already been released as well as those that have not yet been released. In addition, cloud service providers will be given the opportunity to receive a free license to stream these games within EU markets.
These licenses are automatically granted to customers, which means that they will have the legal right to stream Activision Blizzard games that they have purchased or subscribed to on “any cloud game streaming service of their choice and play them on any device using any operating system.” It would appear that the European Commission requested that Microsoft offer this automatic licensing, and the company that makes the Xbox will now apply this worldwide.
The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.
— Brad Smith (@BradSmi) May 15, 2023
“Our decision represents an important step in this direction,” said Margrethe Vestager, executive vice president in charge of competition policy at the European Commission. “By bringing Activision’s popular games to many more devices and consumers than ever before thanks to cloud game streaming,” she added. “Our decision represents an important step in this direction.” “The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, thereby enhancing competition and opportunities for growth.”
The decision to go through with this massive merger by the EU comes a little under a month after the ambitions of Microsoft were rejected by regulators in the UK. The Competition and Markets Authority (CMA) of the United Kingdom stopped the transaction because of worries about the cloud gaming market. According to the CMA’s statement, the acquisition could result in “reduced innovation and less choice for UK gamers over the years to come.” Microsoft has stated that it would appeal the ruling.
Microsoft has spent the last six months attempting to answer the worries of regulators over cloud gaming. The company has been successful in convincing regulators in the EU, but not in the UK. partnerships for cloud gaming were struck between the software giant and competitors Boosteroid, Ubitus, and Nvidia. These partnerships will enable Xbox PC titles to be played on competing cloud gaming platforms. In December, it was stated that a similar deal had been reached with Nintendo. If the arrangement is approved by the relevant authorities, each of these 10-year contracts will also include access to Call of Duty and other Activision Blizzard titles.
The Competition and Markets Authority (CMA) is concerned that if Microsoft controlled Call of Duty, Overwatch, and World of Warcraft, it would have a significant edge over its rivals in the market for cloud gaming services. According to the regulator, Microsoft currently holds approximately 60–70 percent of the global market for cloud gaming services.
There is a good chance that it will be several months before Microsoft’s appeal in the UK is finally resolved. The decision made by the EU today may help enhance Microsoft’s chances of getting this massive deal approved, but the corporation still faces challenges in the United States and the United Kingdom. The transaction has also been given the green light by authorities in the countries of Saudi Arabia, Brazil, Chile, Serbia, Japan, and South Africa. China, South Korea, New Zealand, and Australia are still conducting separate analyses on the transaction.
The next significant obstacle for Microsoft is going to be regulatory scrutiny closer to home. Late in 2018, the Federal Trade Commission filed a lawsuit in an attempt to prevent Microsoft and Activision Blizzard from entering into a merger. The case is currently in the document discovery stage. As of right now, there is going to be a hearing on the evidence on August 2nd, so it will be a few more weeks before we find out the verdict in this case.
While the CEO of Activision Blizzard, Bobby Kotick, expressed his gratitude for the EU’s permission and stated that the firm expects “to meaningfully expand our investment and workforce throughout the EU,” the CMA defended its own position.
According to a statement released by the Competition and Markets Authority (CMA), “The UK, US, and European competition authorities are unanimous that this merger would harm competition in cloud gaming.” If the European Commission were to accept Microsoft’s plans today, it would give the company the ability to determine the rules and regulations that govern this market for the next ten years.
They would establish a market that was subject to continual regulation of the games that Microsoft sells, the platforms to which it distributes them, and the conditions of sale in place of the current market, which is one that is free, open, and competitive. This was one of the factors that led to the independent panel group at the CMA voting against Microsoft’s proposals and preventing the merger from going through. The CMA is standing by its decision despite the fact that we acknowledge and appreciate the European Commission’s right to have a different point of view.
Even if Microsoft was able to submit a compromise to the EU in order to get the deal approved in Europe today, the software manufacturer still has a long and difficult road ahead of it in the appeals process with the CMA.