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Microsoft Submits Revised Takeover Proposal to British Regulator Following Initial Blockage of Activision Blizzard Deal

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Microsoft Submits Revised Takeover Proposal for Activision Blizzard to U.K. Regulators

Microsoft has presented a new deal to U.K. regulators for the acquisition of Activision Blizzard after its initial proposal was rejected. The U.S. technology giant initially offered a $69 billion takeover bid for Activision in January 2022 but has faced regulatory challenges in the U.S., Europe, and the U.K. The U.K.'s Competition and Markets Authority (CMA) confirmed the blockage of the original deal. However, Microsoft and Activision have agreed to a restructured agreement that the CMA will investigate with a decision deadline of October 18.

Restructured Deal and Cloud Rights Divestment

Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, nor for new games released by Activision over the next 15 years. Instead, these rights will be divested to French game publisher Ubisoft Entertainment before Microsoft's acquisition of Activision. The CMA, the toughest critic of the takeover, expressed concerns about potential competition limitations in the emerging cloud gaming market.

Cloud Gaming and Market Impact

Cloud gaming is considered the future of the gaming industry, offering subscription-based services that allow users to stream games on various devices, eliminating the need for expensive consoles. Regulators previously raised concerns that Microsoft could make key Activision games exclusive to Xbox and other Microsoft platforms. In May, the European Union cleared the deal after Microsoft offered concessions such as royalty-free licenses for cloud gaming platforms to stream Activision games.

Regulatory Battles and Restructuring

While the Federal Trade Commission (FTC) in the U.S. initially fought against the Activision takeover, a judge blocked their attempt in July, allowing the deal to proceed. Shortly after, the CMA expressed its readiness to consider proposals from Microsoft to restructure the transaction and address regulatory concerns.

Independent Content Supplier and Licensing Opportunities

The revised deal and divestment of cloud rights to Ubisoft aim to provide an independent third-party content supplier that can distribute Activision's gaming content to all cloud gaming service providers, including Microsoft. Ubisoft will have the ability to license out Activision content under various business models, including subscription services. The deal also requires Microsoft to offer game versions on operating systems other than Windows, which it owns. In conclusion, Microsoft has submitted a revised takeover proposal for Activision Blizzard to U.K. regulators, addressing concerns and proposing a restructured agreement. The divestment of cloud rights to Ubisoft aims to ensure competition and provide players with more opportunities to access and enjoy Activision's games. The CMA will carefully assess the details of the revised deal before making a final decision, emphasizing the importance of maintaining fair competition in the gaming industry.

Implications for New Businesses

The revised takeover proposal from Microsoft for Activision Blizzard underscores the complex dynamics of the gaming industry and the regulatory challenges that can arise in such high-stakes deals. For new businesses, this case serves as a crucial lesson in navigating regulatory landscapes and the importance of flexibility in deal-making.

Considerations for Market Entry

New businesses entering the gaming industry, particularly in cloud gaming, must consider the potential for regulatory scrutiny and the need to ensure fair competition. The divestment of cloud rights to Ubisoft in this case highlights the importance of maintaining independent content suppliers and providing diverse licensing opportunities.
Future of Cloud Gaming
The case also underscores the significance of cloud gaming as the future of the industry. New businesses must consider how they can leverage this trend, while also ensuring they don't limit competition or create exclusive ecosystems that could attract regulatory attention. In conclusion, the Microsoft-Activision Blizzard case provides valuable insights for new businesses in the gaming industry. It highlights the importance of regulatory compliance, the need for strategic flexibility, and the growing significance of cloud gaming. It's a clear reminder that in the rapidly evolving gaming industry, businesses must stay adaptable and cognizant of regulatory expectations.
Story First Published at: https://www.cnbc.com/2023/08/22/microsoft-submits-new-activision-blizzard-takeover-deal-to-uk.html
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