European Union regulators have approved Microsoft’s proposed $69 billion takeover of Activision Blizzard, but with the US tech giant’s proposed remedies. According to the European Commission’s announcement, Microsoft has offered remedies in the cloud gaming sector, addressing its concerns about monopolistic practices.
The remedies referred to by the Commission are essentially the ten-year licensing agreements offered by Microsoft to European consumers and cloud game streaming services for Activision games.
“The commitments fully address the competition concerns identified by the Commission and represent a significant improvement for cloud gaming compared to the current situation,” the EU’s competition watchdog said in a statement.
A counterweight to the British blockade
Europe’s green light is a huge win for Microsoft, especially given that just last month Britain’s Competition Authority effectively blocked the deal. A key concern of the UK CMA is that a potential takeover would reduce competition in the cloud gaming market.
Regulators worldwide are investigating whether Microsoft’s acquisition of Activision could distort competition. The main concern is that Microsoft could bring Activision Blizzard titles exclusively to its own platforms.
It should be noted that Activision is the creator of some of the most popular video game titles in the world, both for PC and consoles, including the veritable… goldmines Call of Duty and World of Warcraft.
In addition to regulatory authorities, Microsoft’s competitors have also expressed opposition to the takeover proposal, first and foremost the Japanese Sony, manufacturer of the PlayStation.
Microsoft attempted to allay concerns about the exclusivity of Activision’s games long before the EU decision. Microsoft President Brad Smith met with EU officials in February, and a deal was announced shortly after with Nvidia, which also was reacting to the acquisition so that Xbox games would be available on its own cloud gaming service.
In the same vein, Microsoft signed a 10-year contract with Nintendo to bring Call of Duty to the Japanese company’s platforms, if the deal with Activision is finally closed.
The future of gaming is in the cloud
The Commission looked at several areas around the deal, including the impact on competition at the console level and the fast-growing cloud gaming market.
Microsoft seems to be lagging behind on its Xbox against Sony’s PlayStation 5 and Nintendo Switch. Fatefully, the American company has turned its attention to the future of the industry which is none other than cloud gaming.
The Commission finds that the acquisition of Activision would not reduce competition in the console market given Sony’s dominance with the PlayStation. Thus, a large part of the EU research focused on cloud gaming.
Cloud gaming will allow users to stream games from servers, thus removing the need for expensive hardware such as consoles or specialized gaming PCs. These games could be played on existing devices such as televisions, smartphones and laptops.
However, the key to the success of cloud gaming is having a large catalog of games that users could access through a subscription service, something like Netflix and other content streaming services. In creating such a service, the acquisition of Activision becomes hugely important for Microsoft.
Microsoft’s corrective actions
EU regulators found that Microsoft would indeed harm competition in the distribution of PC and console games via cloud streaming services as a result of the takeover. One way it would harm competition was if Microsoft made these Activision games exclusively available on its own platform, the Commission says.
However, the European Commission says that Microsoft has offered remedies to address these concerns. It’s simple: consumers who have purchased or will purchase an Activision game will be able to stream the title on any gaming platform of their choice.
Microsoft will also offer royalty-free licenses to cloud gaming platforms for streaming Activision games if a consumer has already purchased them. The idea is that players won’t need to stream the title from where they buy it.
The focus is on the decision of the American FTC
Despite the EU approval, Microsoft still faces an uphill task in convincing rivals such as Sony and other regulators, including the US Federal Trade Commission, that the Activision acquisition will not harm competition. The case between the FTC and Microsoft is still ongoing. A senior Commission official said the EU had exchanged views with the FTC on several occasions and was working closely on the matter.
In addition, the company has until May 24 to file an appeal against the decision of the Competition and Markets Authority (CMA) of Britain. A final decision can take months.
