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EU approves Microsoft’s acquisition of Activision after UK veto


Activision Blizzard’s publisher, Microsoft, has received approval from EU regulators for its $69 billion (£55 billion) takeover bid.

The European Commission (EC) claimed that Microsoft had allayed their concerns regarding matters of competition. Three weeks prior, the UK had blocked the transaction out of concern that it would reduce competition in the newly emerging cloud gaming market. Although the proposed acquisition has divided international regulators, it is expected to be the largest deal in gaming history.

Microsoft and Activision require regulatory approval from the UK, EU, and US in order for the deal to be finalized. The US Federal Trace Commission sued to stop the deal in December, but a judge’s ruling is not likely to be made before the end of the year.

Microsoft’s big deal – what you need to know

According to the European Commission (EC), there would be fair competition in the market as a result of Microsoft’s offer of 10 year free licensing deals, which guarantee European players access to Activision’s PC and console games.

The commitments “fully address the competition concerns identified by the Commission and represent a significant improvement for cloud gaming as compared to the current situation,” the EU competition watchdog said in a statement.

An extensive market analysis revealed that Microsoft “would not be able to harm rival consoles and rival multi-game subscription services,” according to the statement. Additionally, it stated that cloud game streaming services “gave positive feedback and showed interest in the licences,” with some already signing contracts with Microsoft based on their proposals.

Significant hurdles

Experts warned the deal now faces significant obstacles in order to be successful after the UK’s Competition and Markets Authority (CMA) shockingly rejected the deal last month..

Microsoft and Activision have reportedly hired powerful attorneys who have previously defended British Royals to fight that ruling and have filed an appeal..

By prohibiting Microsoft and Activision Blizzard from acquiring shares in each other without “prior written consent” on Thursday, the CMA dealt a further blow..

Sarah Cardell, chief executive of the CMA, responded to the European Commission’s statement by saying they stood by their choice.

The proposals put forth by Microsoft, which were approved by the European Commission today, “would give Microsoft the ability to set the terms and conditions for this market for the next 10 years,” she continued.

They “would substitute a market subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the terms of sale” for one that is free, open, and competitive. The independent panel group of the CMA rejected Microsoft’s proposals and stopped this deal in part because of this.

Cloud gaming – is it the future?

The agreement is crucial for Microsoft, which is attempting to catch up to its primary rival Sony. In terms of sales in the console market, they have outperformed the other two in recent years.

However, rather than betting on the present of games, Microsoft’s attempted massive investment can be seen as a play for the industry’s future. Microsoft is placing a lot of money on its Gamepass service, which could be compared to Netflix for video games.

Instead of making one-time purchases, which are the most common way to access games currently, they believe that players should have subscriptions to libraries in the future.

Although their Gamepass offering is strong, there aren’t enough new games of sufficient quality or quantity to completely change how most players play. With this agreement, it would gain control over some of the most played video games in the world, including Call of Duty, World of Warcraft, and Overwatch. Having control over such titles could greatly improve the service.

An extension of this idea is cloud gaming, which enables users to stream their game on any device they own, from a phone to a console or powerful PC. like playing video games while streaming Disney+ or Amazon Prime.

Due to the necessary technological requirements to make it function, this is currently a small and developing segment of the games industry. It is however seemingly growing with the number of people playing this way in the UK having tripled between 2021 and 2022 according to the CMA.

Microsoft has made investments in this area, and when combined with its Gamepass service, it is well-positioned to take the lead should cloud gaming turn out to be a significant segment of the market.

Because of this, the CMA made the decision to veto the decision in the UK, claiming that it would give Microsoft an unfair advantage in this developing market.

Though many in the games industry disagree with their analysis, this is especially true given how small the cloud gaming market is overall and the uncertainty surrounding its future as the primary method of accessing games..

Post-Brexit friction?

The American technology behemoths did not accept the UK setback humbly. The CMA’s decision, according to Microsoft President Brad Smith, was “bad for Britain.”

In an interview with the BBC last month, he said, “It does more than shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before.”

The European Union is a more desirable location to launch a business than the United Kingdom, which is the clear message here.

There is a lot of money at stake, and the drama is far from over. If the deal falls through, Microsoft will still give $3 billion to Activision Blizzard, for instance.

Some people might interpret the EU’s opposition to the mega-deal as a sign of tensions with the UK following Brexit. Microsoft’s recent 10-year licensing agreements with Nvidia’s GeForce Now, Boosteroid, and Ubitus, three competitors in the cloud streaming market, are thought to have had an impact on the EC’s decision.

Call of Duty will continue to be available on Sony’s PlayStation and Nintendo’s Switch gaming consoles. The path has been made easier by the Activision Blizzard game’s non-exclusivity.

However, the Xbox maker and Valve Corp, which owns Steam, the largest video game distribution platform in the world, haven’t reached a compromise. Valve Corp. CEO Gabe Newell said he didn’t need to sign a deal because he trusted the company’s intentions..


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