In the largest transaction in the history of the video game industry, Microsoft has completed its acquisition of Call of Duty developer Activision Blizzard for $69 billion. UK regulators have given Microsoft, owner of the Xbox gaming console, the go-ahead for the global merger.
The Competition and Markets Authority, which had initially banned the bid, later said that its concerns had been addressed.
The acquisition of Activision Blizzard was “incredible,” according to Phil Spencer of Microsoft.
Activision Blizzard CEO Bobby Kotick revealed in a message to employees that he would be stepping down at the end of 2023 following the announcement of the merger.
“I have long said that I am fully committed to helping with the transition,” added the politician. “[Phil Spencer and I] both look forward to working together on a smooth integration for our teams and players.”
Mr Spencer, CEO of Microsoft Gaming, tried to reassure customers despite concerns from competitors including PlayStation maker Sony and authorities about competition in the gaming business.
Mr. Spencer said in a statement after the takeover, “Whether you play on Xbox, PlayStation, Nintendo, PC, or mobile, you are welcome here – and will remain welcome even if Xbox isn’t where you play your favourite franchise.”
We can only succeed if everyone participates. We’re confident that the information we’re sharing today will open the door to countless new game possibilities.
Microsoft will have a monopoly
Under the new terms of the agreement, French video game developer Ubisoft will be responsible for cloud-based distribution of Activision’s titles for consoles and personal computers.
Despite the compromise, Microsoft will now have monopoly over massively profitable games like Call of Duty, World of Warcraft, and Candy Crush.
The CMA claimed the new agreement would “preserve competitive prices” in the gaming business while also expanding consumer options and improving quality of service.
However, the watchdog did not spare Microsoft criticism for its behaviour during the nearly two-year struggle, despite approving the merger.
Sarah Cardell, CEO of the Competition and Markets Authority, said that Microsoft’s methods “are no way to engage with the CMA,” and that businesses and their advisors should be aware of this.
After we advised Microsoft that the steps they were proposing wouldn’t work, they persisted in pushing through with them nevertheless. This kind of protracted litigation is a waste of resources on all fronts.
UK to become attractive to build technology
Microsoft president Brad Smith criticised the Competition and Markets Authority (CMA) after it vetoed the merger earlier this year, calling the CMA’s decision “bad for Britain” and “counter to the ambitions of the UK to become an attractive country to build technology businesses.”
Although authorities throughout the world have had mixed reactions to it, the European Union has already approved it. Recently, the courts in the United States rejected an attempt by the US competition monitor to halt the transaction.
As CMA’s Ms. Cardell put it, “we’ve made sure Microsoft can’t have a stranglehold over this important and rapidly developing market” by selling Activision’s cloud streaming rights to Ubisoft (the makers of Assassin’s Creed).
“We were clear that that deal couldn’t go ahead, because it would have harmed competition, and that would have been bad for UK gamers,” according to her.
“We take our decisions free from political influence and we won’t be swayed by corporate lobbying.”
Mr. Smith thanked the CMA for its “thorough review and decision,” adding that Microsoft appreciated it.
Ubisoft’s cloud gaming rights
Microsoft is purchasing Activision for US$95 a share in cash, which means that Activision’s outgoing CEO, Mr Kotick, stands to make $400 million and Activision’s chairman, Brian Kelly, stands to make $100,000.
Microsoft has agreed to transfer to Ubisoft, for a period of 15 years outside the European Economic Area (EEA), the rights to stream Activision titles from the cloud under the revised deal. Iceland, Liechtenstein, and Norway are all part of this group.
Ubisoft’s cloud gaming rights for Activision’s content will expire at the end of the 15-year period, but it is believed that the regulator will have established competitors by then, making the cloud gaming industry more competitive.
Microsoft expects that the acquisition will increase demand for the Xbox console and allow the company to expand its Xbox Game Pass service, where users pay a monthly fee to have access to a library of games via the cloud (either download or streaming).
Microsoft intends to build on the success of mobile games like Candy Crush by acquiring Activision’s dedicated mobile studio as part of the agreement.
Sony and Microsoft’s Gaming Battle
The acquisition will solidify Microsoft’s position as a gaming powerhouse and may even propel it past Nintendo to claim third place in the industry behind PlayStation-owning Sony and market leader Tencent.
Concerned that major Activision titles like Call of Duty could become Xbox exclusives in the future, Sony fought hard against this pact.
Sony’s PlayStation is more popular than Microsoft’s Xbox, but both companies need quality content to thrive; Sony isn’t above buying up successful studios if necessary.
The approval of the merger was “great news for gamers,” according to Nicky Stewart, a consultant and the former commercial director of cloud services provider UK Cloud.
“[It will lead to] more choice, more innovation, better value, and improved gaming experiences and a healthy, competitive market,” said Ms. Stewart, a former head of ICT at the Cabinet Office government agency.
Microsoft has made concessions to the CMA in the UK that the company has not made to any other regulatory body. For the young gaming industry in the UK, this is encouraging news.