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Sales Of Streaming Rights By Microsoft And Activision Will Result In The Largest Video Game Deal

Sales Of Streaming Rights By Microsoft And Activision Will Result In The Largest Video Game Deal
Activision Blizzard, the company behind "Call of Duty," will transfer its streaming rights to Ubisoft Entertainment in a new bid to obtain the British anti-trust regulator's blessing for its $69 billion sale to Microsoft.
Early in 2022, Microsoft announced the largest gaming contract in history. However, the deal was halted by Britain's competition watchdog because it feared the American tech giant would have too much control over the burgeoning cloud gaming market.
The Competition and Markets Authority (CMA) announced on Tuesday that it had maintained its original decision to block the acquisition after months of back and forth, requiring Microsoft to submit new terms.
Microsoft will not be able to exclusively control the licencing terms for competing services under the terms of the revised agreement, nor will it be able to release Activision games like "Overwatch" and "Diablo" on its own cloud streaming service, Xbox Cloud Gaming.
Instead, Activision will sell the cloud streaming rights to all of its current PC and console titles as well as any new games it releases in the next 15 years to French gaming rival Ubisoft.
Globally, that will be the case, but not in Europe, where Brussels had already approved the initial agreement. Ubisoft will receive a non-exclusive licence for Activision's rights in Europe so that it can sell those titles there as well.
According to a spokeswoman, EU antitrust investigators are investigating whether Microsoft's attempt to get UK clearance will influence its agreements with the European Commission.
After the U.S. market opened, Activision's stock price increased by 1%. By 0.8%, Microsoft was up.
The acquisition currently appears to be going through, according to Tom Smith, a partner at the law firm Geradin Partners and a former legal director at the CMA. We shouldn't expect big tech mergers to close easily these days, he told Reuters. "The process has been torturous, and there's still potential for the wheels to come off."
Microsoft stated on Tuesday that it thought its latest plan was "substantially different" and that it anticipated the CMA will assess it by October 18.
The CMA stated that it would review the new agreement using its standard procedure, with Phase 1 of the process completing on October 18. The CMA may launch a considerably more extensive Phase 2 investigation if it continues to be concerned about the effect on competition.
After the regulatory procedure took longer than anticipated, the two American corporations already extended the merger deadline, pushing it back by three months to Oct. 18.
Alex Haffner, a lawyer in the law firm Fladgate's competition practise group in the UK, said he didn't think Microsoft would have filed this fresh action if it didn't think it could get the new agreement approved by the British regulator by October 18.
The UK regulator will now extensively examine the new agreement, including getting input from other parties, according to CMA Chief Executive Sarah Cardell.
"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," she said in a statement.
The CMA will contend that Microsoft's significant concession demonstrates the effectiveness of its strict stance on technology agreements since it became a standalone regulator in the wake of Britain's exit from the European Union.
However, competition attorneys have contended that the disagreement with Brussels and the back-and-forth over the merger have greatly increased regulatory ambiguity.
The American Federal Trade Commission opposed the agreement as well, but it was unable to stop it. However, the European Union approved it after acknowledging Microsoft's promises to licence Activision's games for use on other platforms.
The CMA initially declared that it would obstruct the deal in April and was getting ready to defend its position in court.
But in July, after Microsoft claimed that commitments made to the European Union and a new contract with Sony constituted a fundamental change, it took the unusual step of reopening its investigation.
After reviewing those modifications, the CMA stated on Tuesday that it did not agree with them and would block the original agreement, requiring the American giant to resubmit its original conditions.
Microsoft stated that Ubisoft would purchase the rights through a one-time payment and a wholesale price system based on the market, with the ability to accommodate usage-based pricing.

Christopher J. Mitchell

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