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Microsoft and Activision Blizzard Restructure Proposed Acquisition: A New Chapter for the Gaming Industry

In an unexpected move that illustrates the complexity of large mergers in today’s regulatory environment, Microsoft and Activision Blizzard have restructured their proposed acquisition to address concerns raised by the UK’s Competition and Markets Authority (CMA). The deal has taken an interesting twist, as Microsoft has announced an agreement to transfer cloud streaming rights for Activision Blizzard’s games to Ubisoft Entertainment SA for the next 15 years.

A Twist in the Tale

The original acquisition, announced in January 2022 for a whopping $68.7 billion, was designed to elevate Microsoft’s status in the gaming world and help it compete with the likes of Tencent and Sony. But the road to this acquisition has been filled with concerns and hurdles from different regulators.

The CMA’s concern specifically centres on the impact of the acquisition on cloud game streaming in the UK. To ease these worries, the restructured transaction will now exclude Microsoft from releasing Activision Blizzard games exclusively on its cloud streaming service, Xbox Cloud Gaming.

A New Opportunity for Ubisoft

Ubisoft, a leading global game publisher, emerges as a significant player in this equation. With the rights to commercialize the distribution of games via cloud streaming, Ubisoft now has an unprecedented opportunity to innovate different business models in the licensing and pricing of these games on cloud streaming services worldwide.

The agreement includes a one-off payment and market-based wholesale pricing mechanism, and it even provides Ubisoft with the option to offer Activision Blizzard’s games to cloud gaming services running non-Windows operating systems.

A Balancing Act

While addressing the UK’s concerns, Microsoft has managed to structure the agreement to meet its legal obligations in the European Economic Area. This includes commitments to other cloud game streaming providers, such as Nvidia, Boosteroid, Ubitus, and Nware.

The company’s engagement with the European Commission further ensures that the commitments remain undisturbed, reflecting the delicate balancing act required in today’s international regulatory landscape.

A Step Closer

The restructured transaction is being viewed as a positive development for players, the progression of the cloud game streaming market, and the growth of the industry as a whole. More than 40 countries now stand ready to move forward with the transaction.

Microsoft’s Vice Chair & President, Brad Smith, has emphasized that they are one step closer to bringing the joy of gaming to players everywhere. The timeline for regulatory approval remains uncertain, but with the CMA set to rule on the acquisition on August 29, 2023, the gaming industry awaits what could be a historic moment.

Microsoft Xbox Activision Blizzard

Potential Impacts

While the acquisition is still subject to regulatory approval, its potential impacts have been a topic of heated debate:

  • Increased Competition: With a portfolio of popular games, the acquisition could fuel competition, leading to benefits such as lower prices and more innovation.
  • Less Choice: Some experts have expressed concerns over reduced choices for gamers, as Microsoft could become more reluctant to license its games to other platforms.
  • Higher Prices: The acquisition might also lead to higher prices for games as Microsoft leverages its market power.
  • Less Innovation: There are fears that Microsoft could become less focused on developing new games, hindering innovation within the industry.

Conclusion

The restructuring of the Microsoft-Activision Blizzard acquisition is not just a twist in a corporate tale but a reflection of the intricacies of modern global business. How the regulators rule, and the subsequent effects on the gaming industry, will be watched closely by both gamers and industry players alike.

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