On May 15, 2023, European Union regulators granted approval for Microsoft‘s proposed acquisition of gaming company Activision Blizzard, worth $69 billion, in view of remedies offered by Microsoft. The European Commission, the executive branch of the EU, stated that Microsoft addressed antitrust concerns by providing remedies in the emerging field of cloud gaming. These remedies focused on enabling users to stream Activision games purchased on any cloud streaming platform.
BREAKING: The EU has approved Microsoft’s acquisition of Activision Blizzard King. pic.twitter.com/jgp7sCqckO
— Xbox News (@_XboxNews) May 15, 2023
The European Union‘s decision marks a significant victory for Microsoft, especially after the United Kingdom’s top competition authority blocked the deal last month. Regulators worldwide have been investigating whether Microsoft’s acquisition of Activision could distort competition in the console and cloud gaming market. One of the concerns was whether Microsoft would make Activision games exclusive to its own platforms, excluding other competitors.
Blizzard is responsible for a couple of the most globally popular console and PC games, such as the Call of Duty franchise and World of Warcraft. The European Union’s decision follows the United Kingdom’s Competition and Markets Authority‘s rejection of the deal due to concerns about reduced competition in the nascent cloud gaming market. Although the UK CMA stated that the acquisition would not diminish competition in the console market, it feared that Microsoft would benefit commercially by making key Activision games exclusive to its own cloud gaming platforms. Notably, Sony, the maker of the PlayStation games console, and other regulators and rivals have opposed the deal. Microsoft intends to appeal the CMA’s decision.
Vestager the EVP of the European Commission on Microsoft Activision deal: We had a concern in cloud gaming. pic.twitter.com/ao6G0mYMkz
— Post Up (@PostUp_SOG) May 15, 2023
#EUMergerControl Commission 🇪🇺 clears acquisition of Activision Blizzard 🎮by Microsoft, subject to conditions 👇
— EU Competition (@EU_Competition) May 15, 2023
To address the European Commission’s concerns regarding exclusive Activision games, Microsoft vice chair and president, Brad Smith, held a meeting with EU officials in February 2023. Subsequently, Microsoft announced that it would bring Xbox PC games to Nvidia’s cloud gaming service. This move aimed to alleviate opposition from the chipmaker, which reportedly expressed resistance to the acquisition. Furthermore, Microsoft signed a 10-year agreement with Nintendo to bring Call of Duty to the Japanese gaming company‘s platforms if the Activision deal goes through.
The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.
— Brad Smith (@BradSmi) May 15, 2023
Regarding cloud gaming, the European Commission investigated various aspects of the deal, including its impact on competition in the console and the rapidly growing cloud gaming market. While Microsoft’s Xbox X & S has lagged behind Sony’s PlayStation 5 and Nintendo Switch in the latest generation of consoles, Microsoft has placed its future focus on cloud gaming, a nascent segment of the industry.
The EU Commission determined that the Activision acquisition would not harm competition in the console market, considering Sony’s dominance with the PlayStation. However, a significant part of the investigation revolved around cloud gaming. Cloud gaming allows users to stream games from servers, eliminating the need for expensive dedicated hardware like consoles. These games can be played on such devices as TVs, smartphones, and laptops. For instance, if a user purchases a game online, they can stream it through a cloud gaming service. The success of cloud gaming also relies on a vast library of games accessible through a subscription service similar to Netflix. It is one of the reasons behind Microsoft’s interest in acquiring Activision.
The British regulator’s concern stemmed from Microsoft potentially securing a dominant position in cloud gaming before it even got widespread popularity. EU regulators concluded that Microsoft’s acquisition of Activision would harm competition in the distribution of PC and console games via cloud gaming services if Activision games became exclusive to Microsoft’s platform.
Nonetheless, Microsoft offered remedies to address these competition concerns. Consumers who have purchased or will purchase an Activision game will be able to stream these titles on any cloud gaming platform of their choice. Microsoft will also provide royalty-free licenses to cloud gaming platforms to stream Activision games that consumers have purchased earlier. The objective is to allow gamers the flexibility to stream games on platforms other than where they make the purchase.
Activision CEO Bobby Kotick, acknowledging the company’s deep roots in Europe, announced plans to expand their investment and workforce throughout the EU. He expressed excitement about the benefits the Acquisition is about to bring to players in Europe and worldwide.
For now, Microsoft faces the challenge of convincing other regulators, including the U.S. Federal Trade Commission (FTC), that the acquisition will not harm competition. Ongoing discussions between the EU and the FTC have shown close cooperation on the matter.