Microsoft will sell Activision Blizzard streaming rights to Ubisoft in attempt to close deal

Microsoft has restructured its proposed acquisition of Activision Blizzard by agreeing to sell cloud streaming rights to publisher Ubisoft.

The revised deal has been submitted to the UK regulator, the Competition and Markets Authority (CMA) in an effort to close the deal in the region. The CMA remains the last major roadblock to the deal closing.

Microsoft had been attempting to get the CMA to revisit its original decision in April to block the deal, claiming that because the European Commission had approved it since then, and that because it had signed a binding agreement with Sony to keep Call of Duty on PlayStation, the conditions had changed.

However, in a statement today, the CMA said it had “decided that [Microsoft’s submissions] did not provide any basis for a change to the original prohibition decision”, and that today it was imposing “a Final Order which prohibits the original deal on a worldwide basis”.

Microsoft’s announcement appears to be an attempt to get round this prohibition by addressing the CMA’s main concern, which was that Microsoft would potentially dominate cloud gaming with Activision Blizzard titles in its portfolio.

“Today, we are taking another important step regarding this transaction,” Microsoft said in a statement. “To address the concerns about the impact of the proposed acquisition on cloud game streaming raised by the UK Competition and Markets Authority, we are restructuring the transaction to acquire a narrower set of rights.

“This includes executing an agreement effective at the closing of our merger that transfers the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment SA, a leading global game publisher. The rights will be in perpetuity.

“As a result of the agreement with Ubisoft, Microsoft believes its proposed acquisition of Activision Blizzard presents a substantially different transaction under UK law than the transaction Microsoft submitted for the CMA’s consideration in 2022.

“As such, Microsoft today has notified the restructured transaction to the CMA and anticipates that the CMA review processes can be completed before the 90-day extension in its acquisition agreement with Activision Blizzard expires on October 18.

“Under the restructured transaction, Microsoft will not be in a position either to release Activision Blizzard games exclusively on its own cloud streaming service—Xbox Cloud Gaming – or to exclusively control the licensing terms of Activision Blizzard games for rival services.”

The arrangement will give Ubisoft exclusive worldwide rights to stream Activision Blizzard games, except for non-exclusive rights to stream in the European Economic Area, for all existing and current Activision Blizzard games as well as those to be released over the next 15 years once Microsoft’s acquisition of Activision Blizzard is completed.

In a statement today, the CMA reiterated that it was blocking the original proposal and would now consider the new one.

“The CMA has today confirmed that Microsoft’s acquisition of Activision, as originally proposed, cannot proceed,” CMA chief executive Sarah Cardell said.

“Separately, Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously. As part of this new deal, Activision’s cloud streaming rights outside of the EEA will be sold to a rival, Ubisoft, who will be able to license out Activision’s content to any cloud gaming provider.

“This will allow gamers to access Activision’s games in different ways, including through cloud-based multigame subscription services. We will now consider this deal under a new Phase 1 investigation.

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“This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments.

“Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

As part of its investigation on the new deal, the CMA is now inviting comments “from any interested party” on the impact the new proposal could have on competition in the UK.