Microsoft and Activision Restructure Deal: Cloud Streaming Rights and Competition Assessment

In a recent development, Microsoft has announced a significant restructuring of its deal with Activision.

Under the terms of this new agreement, Microsoft will not acquire the cloud streaming rights to all current and future Activision games over the next 15 years.

This move comes in response to concerns raised by the Competition and Markets Authority (CMA).

The primary focus of this restructured deal is to address the concerns outlined by the CMA.

Specifically, the transaction aims to ensure an independent third-party content supplier, Ubisoft, has the capability to provide Call of Duty creator Activision’s gaming content to various cloud gaming service providers.

Ubisoft’s involvement in the deal will involve compensation to Microsoft for the cloud streaming rights to Activision’s games.

This compensation will be structured through a one-time payment and a pricing mechanism, with an option to incorporate pricing based on usage.

In light of this development, the CMA has indicated that it will initiate a new investigation into the matter.

The statutory deadline for a decision regarding the new deal is set for October 18, 2023.

Sarah Cardell, Chief Executive of the CMA, emphasized that the goal remains to ensure a competitive environment within the growing cloud gaming market.

Microsoft’s earlier deal with Activision had faced resistance from the CMA, leading to a clash of opinions.

Microsoft’s President, Brad Smith, expressed strong disappointment over the initial decision, stating that it was a challenging time for the company’s presence in Britain.

However, the recent announcement presents a different perspective.

Brad Smith, in a blog post, expressed optimism about the revised agreement with Ubisoft.

He noted that the new arrangement aligns more favorably with UK law and highlights the positive impact on players and the growth of the cloud game streaming market.

Activision Blizzard CEO Bobby Kotick also shared his thoughts on the new development.

He welcomed Microsoft’s decision to enter into the revised agreement and submit a fresh application to the CMA.

Kotick acknowledged that while the journey has been longer than expected, the integration management team is actively working to ensure a seamless transition.

It’s worth noting that Microsoft could potentially face a $3 billion break-up fee if the deal fails to materialize.

This fee underscores the significance of the restructured agreement and its implications for both Microsoft and Activision.

The gaming and technology industries will be closely watching the outcome of the ongoing assessment by the CMA.