The European Commission has given Microsoft the greenlight for its planned acquisition of Activision-Blizzard, acting as a ray of sunshine for the tech giant after the UK’s CMA blocked the purchase on the grounds that Microsoft would become too dominant in the video game streaming space.
The European Commission partly agrees with its UK peers, though, admitting in their findings that the deal will hurt the nascent streaming market. As a result, Microsoft has made some concessions, both of which will be in effect for the next decade.
First, Microsoft will offer a free license that will enable anyone within the European Economic Area (EEA) to stream any Activision-Blizzard game they already have a license for on any streaming platform they choose.
Second, Microsoft will provide a free license to cloud streaming services to people in the EEA in order to play any Activision-Blizzard titles.
According to the European Commission, both commitments also come with a promise that streamed games will be of the same quality and content as traditionally downloaded games. That’s a rather vague choice of words, though, because by default a streamed game is of lesser quality due to compression, input lag and so on.
Vice Chair and President of Microsoft, Mr. Brad Smith, headed over to Twitter and said, “The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.”
The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.— Brad Smith (@BradSmi) May 15, 2023
In regard to the concern of Microsoft making Activision-Blizzard games exclusive to its own platforms, the European Commission states that “Microsoft would have no incentive to refuse to distribute Activision’s games to Sony, which is the leading distributor of console games worldwide, including in the European Economic Area (‘EEA’) where there are four Sony PlayStation consoles for every Microsoft Xbox console bought by gamers. Indeed, Microsoft would have strong incentives to continue distributing Activision’s games via a device as popular as Sony’s PlayStation.”
Interestingly, the European Commission said something similar when it investigated Microsoft’s acquisition of Zenimax. Microsoft then proceeded to make a lot of Zenimax’s games exclusive to console and PC, such as the upcoming Starfield and the recently released disaster that was Redfall.
The Commission goes on to say, “Even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market. Even if Call of Duty is largely played on console, it is less popular in the EEA than in other regions of the world, and is less popular in the EEA within its genre compared to other markets. Therefore, even without being able to offer this specific game, Sony could leverage its size, extensive games catalogue and market position to fend off any attempt to weaken its competitive position.”
“Even without this transaction, Activision would not have made its games available for multi-game subscription services, as this would cannibalize sales of individual games. Therefore, the situation for third-party providers of multi-game subscription services would not change after the acquisition of Activision by Microsoft.”
This approval is a big win for Microsoft but they still face hefty challenge ahead. America’s Federal Trade Commission is moving ahead with its plans to sue Microsoft. Meanwhile, Microsoft now has to appeal the CMA’s decision because the UK represents its second-largest market.
“The UK, US and European competition authorities are unanimous that this merger would harm competition in cloud gaming,” says the CMA in a statement on Twitter. “Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next 10 years. They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. This is one of the reasons the CMA’s independent panel group rejected Microsoft’s proposals and prevented this deal. While we recognize and respect that the European Commission is entitled to take a different view, the CMA stands by its decision.”
Personally, I’m not a legal expert so I’m largely ignorant as to where Microsoft goes from here. At this point, the only way I can see of Microsoft managing to persuade the CMA is a guarantee to remove all Activision-Blizzard titles from Game Pass within the UK.
Whatever happens, this story will continue to dominate the gaming landscape for a long time to come.