Microsoft's $68.7 billion acquisition of Activision Blizzard looked close to being dead not long ago, but it just took a big step toward clearing its last major obstacle. The UK's Competition and Markets Authority (CMA) has announced that Microsoft's revised agreement "substantially addresses previous concerns and opens the door to the deal being cleared." The agreement is still in consultation, but final approval now looks highly likely.
"The CMA considers that the restructured deal makes important changes that substantially address the concerns it set out in relation to the original transaction earlier this year," the regulator wrote. "In particular, the sale of Activision’s cloud streaming rights to Ubisoft will prevent this important content — including games such as Call of Duty, Overwatch, and World of Warcraft — from coming under the control of Microsoft in relation to cloud gaming."
The UK regulator initially blocked the merger over fears it would hand Microsoft a 60 to 70 percent share of the cloud gaming market, making it a monopoly player. That in turn would give it "incentive to withhold games from competitors and substantially weaken competition in this important growing market."
In response, Microsoft announced last month that it would sell Activision Blizzard streaming rights to Ubisoft in an attempt to win UK approval. It said that if the merger goes through, it would transfer "cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment... in perpetuity." Ubisoft said in a separate release that the titles would be available across a range of services.
The revised deal "substantially addresses most concerns," the CMA wrote, but it still wants to ensure that provisions in the sale of Activision's cloud streaming rights to Ubisoft can't be "circumvented, terminated or not enforced." It added that Microsoft has offered remedies to ensure that those rights are enforceable, and those should resolve any residual concerns.
In an open letter to employees, Activision Blizzard CEO Bobby Kotick said today's news represents "a significant milestone for the merger and a testament to our solutions-oriented work with regulators. I remain optimistic as we continue the journey toward completion and am very grateful to each of you for your dedication and focus throughout this process." Microsoft Vice Chair and President Brad Smith similarly wrote on X:
We are 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…
— Brad Smith (@BradSmi) September 22, 2023
Microsoft managed to turn the deal around after taking a lot of blows from regulators. Late last year, the US Federal Trade Commission (FTC) sued to block the merger, but was later rebuffed by a federal court. The UK's CMA rejected the deal a few months later, but Microsoft appealed the decision and was later given more time to submit an amended deal. It made a major concession with the sale of streaming rights to Ubisoft — and that seems like it may have done the trick. We should know soon, as the CMA's consultation on Microsoft's proposed remedies closes on October 6.
Update September 22 11AM ET: This story was updated after publish to include comments from Activision and Microsoft leadership.