Microsoft concession might be enough to secure biggest gaming deal

Microsoft lashed out in April when the UK’s competition regulator blocked the biggest gaming takeover in history.

The tech giant suggested that the decision showed the UK was not a place to do business.

But after the deal was approved in the EU and attempts to block it were stifled in the US, the CMA was put in a tight spot and expected to fall in line.

So it was something of a surprise when, on Tuesday morning, it was revealed that a concession had been put forward and the deal would be considered afresh.

Microsoft’s proposed remedy is not as grand as it appears, but it might just be enough for the competition regulator to approve its takeover of Activision Blizzard.

It was blocked on the grounds that the American computing giant would gain too much control of the cloud gaming market.

The compromise on the table is the sale of Activision’s streaming rights to Ubisoft Entertainment.

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Cloud gaming is a fast-growing market, but it still only accounts for a tiny share of gaming as a whole, so handing over streaming rights would not significantly dent the benefits Microsoft stands to gain from winning a green light for the merger.

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Selling these rights for 15 years could be presented to the regulator as giving the market time to adjust to the acquisition.

Ubisoft’s reputation as an independent player in the gaming market helps Microsoft’s case that selling streaming rights would nullify the regulator’s concerns.

The founders of the French video game publisher, whose franchises include Assassin’s Creed, have fought several takeover attempts in the company’s 37-year history.

However, the latest offer from Microsoft was unexpected.

Alex Haffner, a competition partner at Fladgate, the British law firm, said: “Rather than use Microsoft’s new offer of a divestment of cloud gaming rights to a competitor to clear the original deal, the CMA has instead rubber stamped that original decision and opened a new investigation into the deal in its revised form.

He added that this opens up the prospect of another lengthy regulatory battle.

“In reality, however, it is hard to believe Microsoft would have taken this new course without a high degree of confidence it will now in due course (finally) get a regulatory green light from the CMA.”

Microsoft had already agreed a 10-year deal to allow other cloud gaming providers access to all Activision games.

The new proposals, which would apply outside of the European Economic Area, hand over streaming rights in the UK and the USA.

On the surface, all of these factors address the concerns raised by the CMA. However, the difference to consumers between the latest proposal and what was already on the table is minimal.

Bobby Kotick, chief executive of Activision Blizzard, told employees of the company in an email on Tuesday morning: “For us, nothing substantially changes with the addition of this divestiture: our merger agreement with Microsoft, closing deadline, and the cash consideration to be paid for each Activision Blizzard share at closing remain the same.

“We will continue to work closely with Microsoft and the CMA throughout the remaining review process, and we are committed to help Microsoft clear any final hurdles as quickly as possible.”

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