Microsoft MSFT has come one step closer to completing its $69-billion purchase of the video game maker, Activision Blizzard ATVI. The U.K.'s Competition and Markets Authority (CMA) has finally approved the acquisition, albeit provisionally.
The CMA has consistently been focused on preserving competition and choice in cloud gaming. Earlier in the year, the CMA blocked Microsoft's attempt to acquire the entire Activision Blizzard company due to concerns about competition in the cloud gaming market in the U.K.
In response to the CMA's concerns, MSFT submitted a restructured transaction in August. Under this new deal, the company will not acquire the cloud gaming rights held by Activision. Instead, the cloud gaming rights will be sold to an independent third party, Ubisoft Entertainment SA UBSFY, before the deal is completed. This move establishes Ubisoft as a key supplier of content to cloud gaming services, which is similar to the role Activision would have played.
Ubisoft will have the freedom to offer Activision's games directly to consumers and to all cloud gaming service providers in various ways, including buy-to-play or subscription services. The deal with Ubisoft also requires Microsoft to make Activision games available on operating systems other than Windows and support game emulators upon request.
The CMA has concluded that the restructured deal addresses most of its concerns about competition. It ensures that important gaming content remains in the hands of an independent supplier (Ubisoft), preventing Microsoft from consolidating too much control in the cloud gaming market.
However, the CMA still has some limited concerns about certain provisions in the sale to Ubisoft, which could be circumvented or not enforced. To address these concerns, MSFT has offered additional remedies to make sure that the terms of the sale of Activision's cloud streaming rights to Ubisoft are enforceable. The CMA has provisionally concluded that these remedies should resolve the remaining concerns.
The CMA has opened a consultation on Microsoft's proposed remedies, which will run until Oct 6.
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Will Microsoft's Latest Gambit Work?
Microsoft remains committed to providing cloud streaming rights in the European Economic Area. The agreement with Ubisoft is structured in a way that allows Microsoft to meet its legal obligations to the European Commission and other existing contractual commitments to cloud game streaming providers. This suggests that MSFT is taking steps to ensure that its actions align with regulatory requirements.
Shares of the company have gained 32.2% year to date compared with the Zacks Computer and Technology sector’s rise of 32.5%.
Microsoft views these developments as positive for various stakeholders, including players, developers, the cloud game streaming market and the gaming industry as a whole.
This Zacks Rank #3 (Hold) company has been working to obtain regulatory approval for the transaction and has made binding legal commitments to address concerns. These commitments ensure that Call of Duty and other Activision Blizzard games will be available on rival consoles, including Sony SONY and cloud streaming platforms. The transaction is now in a position to move forward in more than 40 countries.
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To alleviate regulatory concerns and promote competition in the cloud gaming market, Microsoft has signed agreements with Nintendo and Nvidia. These agreements commit to keeping Activision Blizzard games available on competing platforms for at least 10 years, further ensuring access to these games on various platforms.
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