European Union regulators approved on Monday Microsoft’s Proposed $69 billion acquisition of gaming company activision blizzardeligible for a bailout offered by the US tech giant.
The EU’s executive body, the European Commission, said Microsoft had offered a remedy to sidestep antitrust concerns in the nascent field of cloud gaming. These remedies are focused on allowing the user to stream his Activision games purchased on any cloud streaming platform.
Europe’s go-ahead was a big win for Microsoft after Britain’s top competition authority blocked the deal last month.
Regulators around the world are investigating whether Microsoft’s acquisition of Activision could distort competition in the console and cloud gaming markets. One area regulators have been wondering is whether Microsoft could take Activision’s games and hold them exclusively on the US giant’s own platform.
Activision is behind some of the world’s biggest console and PC games, including the Call of Duty series and World of Warcraft.
The EU’s decision comes after the UK Competition and Markets Authority blocked the deal last month over concerns it would reduce competition in the nascent cloud gaming market. The CMA said Microsoft believes it would be commercially beneficial to dedicate Activision’s flagship games, such as Call of Duty, to its cloud gaming platform. Still, CMA said the acquisition wouldn’t make the console market less competitive.
Microsoft faces opposition to the deal from regulators and some rivals, including PlayStation game console makers. Sony.
Microsoft sought to allay the commission’s concerns about making Activision’s games proprietary ahead of the EU’s decision. Microsoft President Brad Smith met with EU officials in February, after which the tech giant announced that it would bring Xbox PC games to NVIDIA’s cloud gaming service. The chipmaker had reportedly spoken out against the acquisition.
Microsoft Offers Cloud Gaming Remedy
The committee explored many areas of the deal, including its impact on consoles and competition in the burgeoning cloud gaming market.
Microsoft is well behind the Xbox and Sony’s PlayStation 5 and Nintendo Switch in the latest generation of consoles. But the US giant is betting its future in the market on so-called cloud gaming, which is in the early stages of the industry.
The EU Commission has ruled that the acquisition of Activision will not reduce competition in the console market, given Sony’s dominance of the PlayStation.
Most of the EU research focused on cloud gaming.
Cloud gaming makes it possible to stream games effectively from a server, eliminating the need for expensive dedicated hardware such as consoles. These games can be played on your existing devices such as TVs, smartphones and laptops. For example, if a user purchases a game online, it can be streamed through a cloud gaming service.
But the key to cloud gaming’s success is also the large catalog of games that users have instant access to through subscription services like Netflix. This is one of the rationales behind Microsoft’s proposed acquisition of Activision.
of UK regulators were concerned about Microsoft’s ability to secure a dominant position in cloud gaming even before cloud gaming took off.
EU regulators have determined that Microsoft’s acquisition would hinder competition in the distribution of PC and console games via its cloud gaming service. The commission said competition could be hurt if Microsoft made these Activision games exclusive to its platform.
But the European Commission said Microsoft had provided a remedy to ease competition concerns. Consumers who have purchased or will purchase Activision games will be able to stream these titles on their cloud gaming platform of choice. Microsoft also plans to offer royalty-free licenses to its cloud gaming platform to stream Activision games if consumers purchase Activision games. The idea is that gamers don’t necessarily have to stream games wherever they buy them.
A senior European Commission official told reporters on Monday that the measure would increase competition in the market and make it possible for streaming platforms that previously had no access to Activision’s games.
“We were concerned about cloud gaming, [which is ] It’s in the very early stages right now, but it’s going to grow,” EU athletics head Margrethe Vestager told CNBC’s Silvia Amaro on Monday.
“We have been given a remedy, a 10-year license for our existing games and upcoming games for free. , we think it will also promote competition, and that’s good for us.”
Microsoft’s Smith also welcomed the approval.
“The European Commission has asked Microsoft to automatically license Activision Blizzard’s popular game to competing cloud gaming services,” he said in a statement Monday. “Millions of consumers will be able to play these games on their device of choice.”
Activision CEO Bobby Kotick said Thursday that the French-founded company “has deep roots in Europe.”
“We intend to meaningfully expand our investment and workforce across the EU and are excited about the benefits our transaction will bring to players across Europe and around the world,” he added.
UK regulator ‘supports decision’
Both UK and EU regulators saw potential problems with the deal between Microsoft and Activision, but were divided on the conclusion that the UK would block the deal and the European Commission would greenlight the deal. .
Microsoft has proposed a similar bailout to UK authorities as it has offered to the EU, but the UK Competition and Markets Authority said the US tech giant’s solution wasn’t enough.
The UK’s CMA appears to be pushing back against the EU’s decision to clear the deal.
“Microsoft’s proposal, accepted today by the European Commission, will allow Microsoft to set the terms of trade for this market for the next decade,” CMA CEO Sarah Cardel said in a statement on Monday. said.
“They will replace a free, open and competitive marketplace with one subject to continued regulation of the games Microsoft sells, the platforms it sells games on, and the terms of sale. This is the CMA’s independent commission. That’s one of the reasons why the Kai Group rejected Microsoft’s games.” It rejected the offer and blocked the deal. ”
Cardell said the CMA would respect the EU’s decision, but the UK regulator “supports the decision”.
Microsoft plans to appeal the CMA’s decision.
“So we think this not only solves some kind of problem, but it also promotes competition, and that’s good for us.”
US FTC decision in focus
Despite EU approval, Microsoft still faces the tough task of convincing rivals such as Sony and other regulators. Including the U.S. Federal Trade Commission, the Activision acquisition will not adversely affect competition.
The lawsuit between the FTC and Microsoft is still ongoing. A senior European Commission official said the EU has had several exchanges with the FTC and has been cooperating closely on the matter.