Britain set to approve amended Microsoft-Activision deal

By Brian Fung, CNN

(CNN) — Microsoft’s proposed multibillion-dollar purchase of Activision Blizzard took a step closer to fruition on Friday as UK regulators said an amended version of the deal is likely to resolve their concerns over the acquisition.

In a statement, the UK Competition and Markets Authority (CMA) said that changes Microsoft (MSFT) put forward — involving the sale of Activision’s cloud gaming rights to Ubisoft, a competitor — could help ensure that the nascent cloud gaming industry remains competitive.

Microsoft (MSFT) announced the deal in early 2022, but it was blocked in April by the UK competition regulator.

Regulators had worried that Microsoft’s control over popular Activision (ATVI) titles, including “Call of Duty,” “World of Warcraft” and others, might allow it to withhold that content from rival gaming platforms.

Of particular concern was the deal’s impact on newer cloud-based services that allow players to access game content over the internet without having to download game files to their devices first. Such services are offered by Microsoft, as well as Nvidia and Sony.

Microsoft’s proposal would allow Ubisoft to sell access to Activision titles via streaming cloud services in addition to traditional retail channels, the CMA said.

The CMA added Microsoft’s amended deal would be effective in “replicating the role that Activision would have played in the market as an independent player.”

Consummating the deal would turn Microsoft into the third largest video game publisher in the world, after Tencent and Sony.

Microsoft said it was “encouraged by this positive development in the CMA’s review process.”

“We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18 deadline,” Microsoft President Brad Smith said.

Activision, which also makes “Overwatch” and “Candy Crush,” said the preliminary approval was great news for its future with Microsoft. Its shares gained 1.8% in early trading.

The European Union waved the deal through in May after accepting Microsoft’s commitments to license Activision’s games to other platforms, the same remedies that Britain had rejected.

The US Federal Trade Commission also opposes the deal, but it has failed to stop it. A federal judge ruled in July that the deal can close, a decision the FTC is appealing.

Equity analyst Sophie Lund-Yates at Hargreaves Lansdown said the loss of the cloud gaming rights was not an ideal concession for Microsoft to have to make, but it was necessary collateral if the deal were to be waved through.

“This looks to be the final bump in the road,” she said.

The CMA said there were “residual concerns” around the Ubisoft deal, but Microsoft has offered remedies to ensure the terms of the sale were enforceable by the regulator.

It is now consulting on the remedies before making a final decision.

— Reuters contributed to this article.

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