What you need to know
The UK's Competition and Markets Agency shared preliminary approval of Microsoft's plan to purchase Activision Blizzard.
The decision came after Microsoft restructured its deal, with the largest change being the sale of cloud streaming rights of Activision Blizzard titles to Ubisoft.
The Competition and Markets Agency will receive third-party feedback over the next few weeks and is expected to make a final decision before October 18, 2023.
Microsoft is one massive step closer to purchasing Activision Blizzard. Today, the UK's Competition and Markets Agency (CMA) provisionally approved Microsoft's $75 billion deal to buy Activision Blizzard. The decision follows Microsoft restructuring its deal to sell the cloud streaming rights of Activision Blizzard titles to Ubisoft. That change, along with other proposals, was enough to sway the CMA, at least provisionally.
"The sale of Activision’s cloud gaming rights to Ubisoft substantially addresses previous concerns and opens the door to the deal being cleared," said the CMA.
Today's decision is not approval of the deal. The CMA is, however, content with Microsoft's proposed changes. The agency will now have a consultation until October 6, 2023 to discuss the proposed remedies provided by Microsoft. A final decision is expected by October 18, 2023.
A post on gov.uk explains the decision. Here's the crux of why the CMA changed its mind following concessions and changes proposed by Microsoft:
"The CMA considers that the restructured deal makes important changes that substantially address the concerns it set out in relation to the original transaction earlier this year.
In particular, the sale of Activision’s cloud streaming rights to Ubisoft will prevent this important content – including games such as Call of Duty, Overwatch, and World of Warcraft – from coming under the control of Microsoft in relation to cloud gaming. The CMA originally found that Microsoft already has a strong position in cloud gaming services and could have used its control over Activision content to stifle competition and reinforce this position. The new deal instead results in the cloud streaming rights for Activision’s games being transferred to an independent player, Ubisoft, maintaining open competition as the market for cloud gaming develops over the coming years."
Microsoft President Brad Smith reacted to the news positively.
"We are encouraged by this positive development in the CMA’s review process," said Smith. "We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18 deadline."
Activision Blizzard CEO Bobby Kotick shared an email with employees that has also been posted online by Activision Blizzard.
"This is a significant milestone for the merger and a testament to our solutions-oriented work with regulators. I remain optimistic as we continue the journey toward completion and am very grateful to each of you for your dedication and focus throughout this process," said Kotick.
"As the regulators continue their process, I will keep you updated on our progress towards our expected closing."
Several key decision makers and figures at the CMA also shared quotes on Microsoft's restructured deal, both of which look promising for Microsoft.
"This is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft," said Colin Raftery, senior director of mergers and Phase 1 decision maker.
“With additional protections to make sure that the deal is properly implemented, this will maintain the structure of the market, enabling open competition to continue to shape the development of cloud gaming in the years to come, and giving UK gamers the opportunity to access Activision’s games in many different ways, including through cloud-based multigame subscription services.”
Sarah Cardell, the CEO of the CMA, also weighed in.
"The CMA’s position has been consistent throughout – this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved. In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns."
While Cardell seems happy with the changes, the CEO said that it "would have been far better, though, if Microsoft had put forward this restructure during [the CMA's] original investigation."