Microsoft’s proposed acquisition of Activision Blizzard has taken a surprising turn, as the tech giant has decided to restructure the deal, transferring cloud gaming rights for existing and future Activision Blizzard games to Ubisoft. This significant pivot comes as part of Microsoft’s efforts to appease regulators, particularly in the UK, who had raised concerns about the impact of the deal on cloud gaming competition.
Restructuring the Deal
In an unexpected move, Microsoft has announced a restructured deal, set to sell the cloud streaming rights for Activision Blizzard’s games to Ubisoft. In a statement, Microsoft’s chairman Brad Smith explained the rationale behind this decision.
“To address concerns raised by the UK Competition and Markets Authority about the impact of the proposed acquisition on cloud game streaming, we are restructuring the transaction to acquire a narrower set of rights,” Smith expressed.
The restructured agreement will transfer the cloud streaming rights for all current and future Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment SA. The rights will be conferred in perpetuity.
Impact on Microsoft’s Cloud Gaming
The restructuring of the deal means that if Microsoft successfully finalizes the proposed acquisition, it will no longer be able to release Activision Blizzard games exclusively on Xbox Cloud Gaming. Consequently, Microsoft will not have exclusive control over the licensing terms of Activision Blizzard games on rival services.
Smith elucidated, “Ubisoft will compensate Microsoft for the cloud streaming rights to Activision Blizzard’s games through a one-time payment and a market-based wholesale pricing mechanism, including an option that supports pricing based on usage.”
This deal will also offer Ubisoft the chance to offer Activision Blizzard’s games for cloud gaming services that run on non-Windows operating systems.
Ubisoft’s Gain
Ubisoft stands to benefit significantly from this deal, with the opportunity to add Activision Blizzard games to its Ubisoft Plus Multi Access subscription. This service is currently available on PC, Xbox, PlayStation through Amazon Luna and Ubisoft Plus Classics.
The agreement also provides Ubisoft with an opportunity to innovate and encourage different business models in the licensing and pricing of these games on cloud streaming services worldwide.
Regulatory Challenges
The UK’s Competition and Markets Authority (CMA) had previously cited concerns about cloud gaming before consenting to negotiate with the Xbox maker, following a Federal Trade Commission (FTC) defeat in US federal court. The deal had been put on hold until Microsoft proposed the restructured deal, which has triggered a new regulatory probe.
This new probe, set to last until October 18, has put a final injunction on Microsoft’s original deal, banning it worldwide while the CMA investigates the new restructuring of the proposed Activision Blizzard acquisition.
Affects on Microsoft’s EU Obligations
Notably, the restructured transaction will not affect Microsoft’s obligations to the European Commission. Microsoft has made several cloud gaming deals and EU regulators have approved the Activision Blizzard deal, thanks to a free license for consumers in EU countries that allows them to use “any cloud game streaming services of their choice”.
“The agreement with Ubisoft is structured in such a way that Microsoft will still receive the rights necessary to fully honor its legal obligations under its commitments to the European Commission, as well as other cloud gaming providers,” Smith stated.
The Future of the Deal
The CMA will now assess the restructured deal over the coming weeks and make a decision by the October 18 deadline. “We will carefully and objectively assess the details of the restructured deal and its impact on competition in the light of comments from third parties,” said CMA chief executive Sarah Cardell.
The goal remains ensuring that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.
Conclusion
In conclusion, Microsoft’s decision to restructure the Activision Blizzard deal, by transferring cloud gaming rights to Ubisoft, represents a significant shift in the gaming industry’s landscape. Whether this move will appease regulators and smooth the path for the deal’s completion remains to be seen. What’s certain is that the cloud gaming market’s future will be significantly impacted by these developments, underscoring the importance of maintaining open and effective competition in this rapidly growing sector.