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Microsoft closes deal to buy Call of Duty maker Activision Blizzard after antitrust fights

Britain’s competition watchdog gave its approval, reversing its earlier decision to block the deal. The acquisition is one of the most expensive tech transactions in history and will boost Microsoft’s Xbox gaming console

Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard's games characters in this illustration taken January 18, 2022.
Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard's games characters in this illustration taken January 18, 2022.DADO RUVIC (REUTERS)

Microsoft has completed its acquisition of video game-maker Activision Blizzard for $69 billion, closing one of the most expensive tech acquisitions in history that could have repercussions across the video game industry. The notice that the deal has gone through came 7 hours after Microsoft got final approval from Britain’s competition watchdog, which reversed its earlier decision to block the $69 billion gaming deal, removing the last obstacle for the transaction.

Taking over the studios behind blockbuster games like Call of Duty, Diablo and Overwatch will be a boost for Microsoft’s Xbox gaming console, which ranks third in sales behind PlayStation and Nintendo. The software giant also has bigger ambitions to fold Activision titles into its multi-game subscription service that works something like a Netflix for video games.

The nearly 22 months it took to close the deal reflected concerns from rivals and government regulators that Microsoft could use its growing collection of games to lessen competition. It’s part of a broader industry consolidation that also has some independent game developers worried they’ll get sidelined as the industry allocates its resources toward blockbuster franchises with a history of past success.

The blessing from the U.K.’s Competition and Markets Authority was expected after it gave preliminary approval last month to a revamped Microsoft proposal meant to address concerns that the deal would harm competition and hurt gamers, especially in the emerging cloud gaming market where players can avoid buying pricey consoles and stream games to their tablets or phones. “The new deal will stop Microsoft from locking up competition in cloud gaming as this market takes off, preserving competitive prices and services for UK cloud gaming customers,” the watchdog said.

Microsoft was grateful for the " thorough review and decision” on a tie-up that “will benefit players and the gaming industry worldwide,” President Brad Smith said. Activision CEO Bobby Kotick says the game maker looks “forward to becoming part of the Xbox Team.” The deal will benefit gamers and be “productive for the gaming industry as a whole,” said Josh Chapman, managing partner at venture capital firm Konvoy, which invests in video game startups.

However, it also tilts the “balance of power significantly” in favor of Microsoft, whose Xbox console has lagged behind Sony’s PlayStation and Nintendo, said George Jijiashvili, senior principal analyst at tech research and advisory firm Omdia. Microsoft “now has a big opportunity to dictate the future of the games industry,” he said.

Since the deal was announced in January 2022, Microsoft has secured approvals from antitrust authorities covering more than 40 countries. Crucially, it got a thumbs-up from the 27-nation European Union after agreeing to allow users and cloud gaming platforms to stream its titles without paying royalties for 10 years.

But the deal faced resistance from British and American regulators who worried it would stifle competition in the video game industry. Top rival Sony also feared it would limit PlayStation gamers’ access to Call of Duty, Activision’s long-running military shooter series.

The U.S. Federal Trade Commission lost a court bid to pause the deal so that its in-house judge could review it. The FTC hasn’t given up, appealing the decision and last month filing notice of its plan to resume that trial. That signals the U.S. regulator’s intention to unwind the deal even after it closes.

In the meantime, the U.K. regulator was the last major hurdle to the transaction going through. To get its approval, Microsoft will sell off cloud streaming rights outside the EU and three other European countries for all current and new Activision games released over the next 15 years to French game studio Ubisoft Entertainment.

British regulators had initially blocked the transaction over concerns Microsoft could withhold Activision titles from the cloud gaming market. Then, in an unprecedented move, the U.K. watchdog said it needed to reconsider.

One factor was the EU’s approval, granted after Microsoft promised to automatically license Activision titles royalty-free to cloud gaming platforms. Another “material change of circumstance,” according to court documents, was an agreement Microsoft signed with Sony to make Call of Duty available on PlayStation for at least 10 years. But the regulator still criticized how the deal came together and warned other companies not to use the “tactics employed by Microsoft.”

“Microsoft had the chance to restructure during our initial investigation but instead continued to insist on a package of measures that we told them simply wouldn’t work,” the watchdog’s CEO, Sarah Cardell, said in a statement. “Dragging out proceedings in this way only wastes time and money.”

The U.K. regulator “deserves credit for imposing a structural remedy on Microsoft that is significantly stronger than the weak commitments accepted by the European Commission,” said Max von Thun, director of the Europe office of the Open Markets Institute, a proponent of stronger antitrust enforcement.

But the CMA’s flip-flopping makes the U.K. regulator look “weak and indecisive,” he said. “Moving forward, there is now a serious risk that in their dealings with the CMA, merging companies and their advisors will no longer take no for an answer,” von Thun said.

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