Following the final stamp of approval from UK regulator CMA and respecting last week's rumor, Microsoft has just announced the closure of its proposed acquisition of Activision Blizzard, ending an odyssey that lasted nearly 21 months (639 days, to be exact).
Microsoft Gaming CEO Phil Spencer said in a statement:
Together, we’ll create new worlds and stories, bring your favorite games to more places so more players can join in, and we’ll engage with and delight players in new, innovative ways in the places they love to play including mobile, cloud streaming and more.
Today we start the work to bring beloved Activision, Blizzard, and King franchises to Game Pass and other platforms. We’ll share more about when you can expect to play in the coming months. We know you’re excited – and we are too.
For the millions of fans who love Activision, Blizzard, and King games, we want you to know that today is a good day to play. You are the heart and soul of these franchises, and we are honored to have you as part of our community. 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 favorite franchise.
Microsoft originally unveiled the groundbreaking deal worth $68.7 billion in cash on January 18th, 2022. At the time, Microsoft Gaming CEO Phil Spencer immediately said 'as many Activision Blizzard's games as possible' would be added to the Game Pass subscription service upon closure. Recently, Activision Blizzard shared in a public statement that popular premium games like Diablo IV and Call of Duty: Modern Warfare III wouldn't land on Game Pass before 2024, and Spencer's statement published today reveals it'll indeed be a few months before the games start coming to the subscription service.
On January 18th, 2022, Spencer also reckoned Activision Blizzard's prized games could 'accelerate' Microsoft's plans for cloud gaming. However, that seems less likely with the restructured deal that's been approved since Microsoft had to sell ABK's cloud streaming rights to Ubisoft.
Let's take a step back to see how it got there. Such a massive deal was bound to incur the scrutiny of regulators; the first roadblock was placed on Microsoft's path by the US Federal Trade Commission, which announced its intention to sue to block the deal in December 2022, alleging potential harm to competition in the console market. However, its in-house administrative process was quite slow, with the first hearing only set for August 2023.
The UK regulator (the Competition and Markets Authority) had also voiced similar concerns. In late March 2023, though, the CMA discarded the theory of harm to the console market, admitting that it wouldn't make financial sense for Microsoft to remove Call of Duty from rival consoles such as PlayStation. That news seemingly paved the way to an approval, especially since Microsoft had been working hard to offer 10-year contracts to bring Activision Blizzard games (specifically Call of Duty) to cloud streaming providers like NVIDIA's GeForce NOW and platform holders such as Nintendo. However, the CMA surprised everyone when it blocked the acquisition in late April, citing concerns about competition within the cloud market that weren't addressed by the aforementioned deals.
At this point in time, Microsoft's proposed acquisition seemed nearly dead in the water. However, the European Union approved the deal two weeks later, throwing Microsoft a much-needed lifeline. While the EU regulator shared the concerns about the cloud market, it engaged in a discussion with Microsoft and obtained the following satisfactory remedies:
- A free license to consumers in the EEA that would allow them to pick the cloud game streaming service of their choice to play all current and future Activision Blizzard PC and console games.
- A corresponding free license to cloud game streaming service providers to allow EEA-based gamers to stream any Activision Blizzard's PC and console games.
Most of the world's regulators had already approved at that point in time or would do so in short order, like China. With the EU approval in their pockets, Microsoft appealed to the UK's Competition Appeal Tribunal and prepared to close ahead of the July 18th, 2023 deadline. After learning of this development, the US FTC rushed to federal court to get an injunction to block the deal from closing.
Following a relatively brief trial that eventually opened up many Pandora's boxes, on July 11th, 2023 Judge Jacqueline Scott Corley of the Northern District of California denied the injunction, giving Microsoft a big victory. On the very same day, the CMA announced it had agreed with Microsoft to stay the CAT appeal while negotiations between the parties resumed.
It was clear that Microsoft would have to agree to a divestiture of cloud rights if it had to appease the UK regulator. On August 22nd, 2023, the proverbial rabbit from the top hat finally appeared, for once without any prior rumors: it was Ubisoft, which agreed to pay Microsoft an undisclosed one-time fee to obtain cloud streaming rights for all Activision Blizzard titles released over the next 15 years.
Still, Microsoft must be willing to spend all that cash even with these caveats. The purchase of ABK will give it ownership of franchises like Call of Duty, Diablo, Warcraft, Starcraft, Overwatch, Crash Bandicoot, Spyro, Guitar Hero, and many more classics. Moreover, as pointed out by Phil Spencer more than once, one of Microsoft's primary goals with this acquisition was to increase its presence on mobile; to that end, King's Candy Crush megahit was deemed as critical as Call of Duty.
With the finalization of this acquisition, Microsoft is set to become the third-largest gaming company in the world by revenue, behind Tencent and Sony. The FTC still seems intent to try and unwind the merger, but it'll be an uphill legal battle unlikely to succeed.
