Did the Government Stop Microsoft from Buying Activision?

The short answer is no, the government did not ultimately stop Microsoft from buying Activision. Despite initial hurdles and significant regulatory scrutiny, Microsoft successfully closed its $69 billion acquisition of Activision Blizzard in October 2023. However, the road to completion was far from smooth, involving intense legal battles and concessions to various regulatory bodies across the globe. This article dives into the complex journey of this landmark deal, exploring the challenges, triumphs, and the deal’s potential impact on the gaming industry.

The Initial Roadblocks: Regulatory Concerns

The proposed acquisition immediately triggered antitrust concerns worldwide. Regulators feared that Microsoft’s control over Activision Blizzard’s vast gaming catalog, including iconic franchises like Call of Duty, World of Warcraft, and Candy Crush, would give the tech giant an unfair competitive advantage.

The CMA’s Opposition

The UK’s Competition and Markets Authority (CMA) initially blocked the deal in April 2023. Their primary concern centered around the cloud gaming market. The CMA argued that Microsoft could potentially restrict access to Activision Blizzard’s games on rival cloud gaming platforms, stifling competition and harming consumers. This was a major setback for Microsoft, as the UK is a significant gaming market.

The FTC’s Challenge

In the United States, the Federal Trade Commission (FTC) also attempted to block the acquisition. The FTC echoed concerns about Microsoft potentially making Call of Duty an exclusive title for its Xbox consoles and Game Pass service, thereby disadvantaging competitors like Sony and Nintendo. The FTC argued that this would stifle innovation and limit consumer choice in the console gaming market.

Microsoft’s Countermeasures and Concessions

Faced with strong regulatory opposition, Microsoft embarked on a strategic campaign to address these concerns and secure approval for the acquisition. This involved making significant concessions and legal arguments:

• Cloud Gaming Agreements: Microsoft offered legally binding agreements to several cloud gaming providers, including Nvidia and Ubitus, guaranteeing access to Activision Blizzard’s games on their platforms for a period of ten years. This was a direct response to the CMA’s primary concern.

• Commitment to Call of Duty Parity: Microsoft repeatedly pledged to keep Call of Duty available on PlayStation consoles, ensuring parity in terms of content, features, and release timing. This commitment aimed to alleviate the FTC’s fears about console market dominance.

• Legal Challenges and Appeals: Microsoft actively contested the FTC’s legal challenge in court. The company ultimately won a crucial legal victory in the US, with a federal judge ruling against the FTC’s attempt to delay the acquisition.

The Final Approval and Acquisition

Despite the initial setbacks, Microsoft’s efforts eventually paid off. The European Union (EU) approved the deal after Microsoft made concessions to ensure continued access to Activision’s games for rivals. The US court victory further solidified Microsoft’s position.

Crucially, Microsoft successfully addressed the CMA’s concerns by restructuring the deal. They agreed to sell the cloud gaming rights for Activision Blizzard games in the UK to Ubisoft, a French video game company. This effectively removed Microsoft’s direct control over cloud gaming distribution in the UK, satisfying the CMA’s antitrust concerns.

With these changes, the CMA reversed its initial decision and approved the acquisition in October 2023, paving the way for Microsoft to finally close the deal.

The acquisition of Activision Blizzard has significant implications for the future of the gaming industry. Microsoft now possesses a vast library of valuable gaming IP, strengthening its position in the console, PC, and mobile gaming markets. The integration of Activision Blizzard’s games into Xbox Game Pass is expected to further boost the subscription service’s popularity.

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Frequently Asked Questions (FAQs)

1. Why was the Microsoft-Activision deal so controversial?

The deal was controversial because it involved a massive acquisition of a major gaming publisher by a tech giant, raising concerns about antitrust issues, market dominance, and potential harm to competition.

2. What were the main concerns of the regulators?

The main concerns were about market share in the console gaming market, cloud gaming, and the possibility of Microsoft making popular Activision Blizzard games like Call of Duty exclusive to its platforms.

3. How did Microsoft address the concerns about Call of Duty exclusivity?

Microsoft made a legally binding commitment to keep Call of Duty available on PlayStation consoles with parity in content and features.

4. What role did the CMA play in the acquisition process?

The CMA initially blocked the acquisition due to concerns about the cloud gaming market. They later approved the deal after Microsoft restructured it to sell cloud gaming rights in the UK to Ubisoft.

5. What was the FTC’s position on the deal?

The FTC attempted to block the acquisition in the US, arguing that it would harm competition in the console gaming market. However, a US federal judge ruled against the FTC’s attempt to delay the acquisition.

6. Did the EU approve the Microsoft-Activision deal?

Yes, the European Union (EU) approved the deal after Microsoft made concessions to ensure that rivals would have continued access to Activision’s games.

7. What is cloud gaming, and why was it a concern for regulators?

Cloud gaming allows players to stream games over the internet without needing to download or install them. Regulators were concerned that Microsoft could use its control over Activision Blizzard’s games to dominate the cloud gaming market.

8. How did Microsoft restructure the deal to satisfy the CMA?

Microsoft agreed to sell the cloud gaming rights for Activision Blizzard games in the UK to Ubisoft.

9. What is Xbox Game Pass, and how will the acquisition affect it?

Xbox Game Pass is a subscription service that gives players access to a library of games. The acquisition will add Activision Blizzard’s games to Game Pass, making the service more attractive to subscribers.

10. What are the potential benefits of the acquisition for gamers?

The acquisition could lead to more games being available on Xbox Game Pass, potential new games and experiences developed by the combined Microsoft and Activision Blizzard teams, and increased investment in the gaming industry.

11. What impact will the acquisition have on Sony and Nintendo?

The acquisition could make it more challenging for Sony and Nintendo to compete with Microsoft in the console gaming market, but Microsoft has pledged to keep Call of Duty available on PlayStation.

12. Who is Phil Spencer, and what role will he play after the acquisition?

Phil Spencer is the head of Microsoft Gaming. He will lead the new division within Microsoft that includes Xbox, Activision Blizzard, and other gaming studios.

13. How much did Microsoft pay for Activision Blizzard?

Microsoft paid $69 billion for Activision Blizzard in an all-cash deal.

14. When did Microsoft officially close the Activision Blizzard deal?

Microsoft officially closed the Activision Blizzard deal on October 13, 2023.

15. Will Activision Blizzard games become exclusive to Xbox?

While Microsoft has not ruled out the possibility of future exclusivity for some games, they have committed to keeping Call of Duty available on PlayStation for the foreseeable future.