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Microsoft closes $69 billion takeover of Activision Blizzard

Microsoft (MSFT) on Friday finalized its $69 billion purchase of "Call of Duty" maker Activision Blizzard (ATVI), according to a regulatory filing from the company Friday, in what is the largest-ever merger for the gaming market.

The deal closed Friday after Microsoft cleared a final hurdle from the UK’s Competition and Markets Authority (CMA). The regulator said concessions proposed in a revised acquisition agreement with Activision satisfied the antitrust regulator’s concerns that the transaction would give Microsoft an unfair advantage in the cloud gaming market.

“The new deal will stop Microsoft from locking up competition in cloud gaming as this market takes off, preserving competitive prices and services for UK cloud gaming customers,” the CMA said in a press release.

Under the renegotiated terms, French gaming company Ubisoft Entertainment SA will acquire the rights to Activision’s cloud gaming content for 15 years, ensuring that it will remain available on non-Windows operating systems.

The deal makes Microsoft the third-largest video game company in the world by revenue behind Sony (SONY) and Tencent.

The CMA was the last major roadblock keeping Microsoft from completing the purchase.

In July, the US Federal Trade Commission (FTC) suspended its administrative challenge to the deal after both a federal district court judge and a three-judge federal appellate court panel declined to grant the commission a preliminary injunction that would have kept the tie-up from happening as it battled the merger.

Global regulators including those in the EU, Brazil, China, Japan, and South Korea have also approved the deal. In its initial objection to the deal, the CMA said the acquisition threatened to "alter the future of the fast-growing cloud gaming market." The impact on cloud gaming, the CMA said at the time, could lead to "reduced innovation and less choice for UK gamers over the years to come."

In its original complaint, the FTC said that Microsoft's ownership of Activision "would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."

US District Judge Jacqueline Scott Corley denied the agency’s request to hold up the deal.

"The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull 'Call of Duty' from Sony PlayStation or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets," Corley said.

Brian Quinn, a Boston College Law School professor, said the FTC can continue to fight the deal after it closes, though courts generally shy away from unraveling integrated companies.

"The FTC’s been down that road," Quinn said. "The remedies available include taking apart the merged companies, and that's also the remedy that nobody wants to do. No court wants to be in charge of taking a deal apart."

An image from Activision's Call of Duty is shown on a smartphone near a photograph of the Microsoft logo.
An image from Activision's Call of Duty is shown on a smartphone near a photograph of the Microsoft logo. (AP Photo/Peter Morgan, File) (ASSOCIATED PRESS)

Microsoft announced its plans to buy Activision Blizzard in January 2022. Activision Blizzard's incredibly successful "Call of Duty" franchise is key to the deal. The game series earns Activision Blizzard billions each year, with the latest installment, 2022's "Call of Duty: Modern Warfare II," clearing $1 billion in sales in its first 10 days on the market.

To assuage the US’s and other regulators' concerns that Microsoft would abuse the deal to wall off "Call of Duty" from its rivals, the company has signed agreements with Nintendo, Nvidia, and, most recently, Sony, ensuring the game is available on their respective gaming consoles for at least 10 years.

Microsoft says it intends to bring "Call of Duty" and Activision Blizzard's other franchises including "World of Warcraft" and "Diablo" to its Xbox Game Pass cloud gaming platform. The move will give Microsoft a huge boost in the still nascent cloud gaming wars, drawing more gamers to its subscription offering.

The service, which costs $15 per month to access Microsoft's cloud gaming service as well as the ability to download games to your console or PC, is well ahead of rival platforms Sony, Nvidia, and Amazon thanks to its wide array of games and ease of use.

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