Microsoft, the creator of Xbox (MSFT.O), successfully concluded its $69 billion acquisition of Activision Blizzard (ATVI.O) on Friday, significantly strengthening its presence in the video game market with hit titles like “Call of Duty.” This move positions Microsoft to compete more effectively with industry leader Sony (6758.T).
This mega-deal, first announced in January 2022, cleared its last significant regulatory hurdle with approval from the United Kingdom. To address competition concerns, Microsoft agreed to sell streaming rights for Activision’s games.
This acquisition is a major strategic win for the U.S. tech giant as it seeks to attract a larger audience to its Xbox consoles and Game Pass subscription service. Currently, Microsoft’s gaming revenue lags behind Sony’s, with PlayStation outselling Xbox.
Phil Spencer, CEO of Microsoft Gaming, shared his enthusiasm, stating, “Today is a good day to play,” on the X social media platform. He will oversee the Activision business, with the video game publisher’s CEO, Bobby Kotick, remaining until the end of 2023.
Spencer has emphasized that this acquisition positions Microsoft to enter the expanding $90+ billion mobile gaming market. Activision is well-known for its popular mobile games such as “Candy Crush Saga” and “Call of Duty Mobile,” which were not part of the cloud streaming agreement Microsoft had with France’s Ubisoft Entertainment (UBIP.PA) to secure UK approval.
According to Michael Pachter, an analyst at Wedbush Securities, “Microsoft instantly has more than $3 billion of mobile revenues,” highlighting the significance of this acquisition.
“The big benefit is that Microsoft has a vision that they are going to deliver games through a subscription, and they need more content to give subscribers. So, this is a big step toward having sufficient content,” he added.
Regulatory Challenges
The deal is still facing opposition from the U.S. Federal Trade Commission (FTC), which previously failed to block the acquisition. The FTC expressed its intention to focus on its appeal but stated it would “assess” Microsoft’s agreement with Ubisoft.
Analysts believe that the impact of an FTC challenge will be limited to incremental concessions in the future, according to D.A. Davidson analyst Gil Luria. The primary regulatory obstacle came from the UK’s Competition and Markets Authority (CMA), which initially blocked the deal in April over concerns it could give Microsoft a monopoly in the nascent cloud gaming market. This case was a major test of the CMA’s global authority to confront tech giants since the UK’s departure from the European Union.
In response to Microsoft’s streaming concession, the CMA stated that this deal would prevent Microsoft from monopolizing cloud gaming, ensuring competitive prices and services for UK cloud gaming customers.
Despite opposition, the CMA’s firm stance aimed at addressing competition concerns highlights its commitment to preserving competition, consumers, and economic growth. Microsoft had criticized the CMA’s initial decision.
The European Commission previously approved the acquisition in May after Microsoft committed to licensing Activision’s games like “Overwatch” and “World of Warcraft” to other platforms.
This acquisition positions Microsoft as a significant player in the gaming industry, ensuring that the competition remains robust, ultimately benefiting consumers in the UK and beyond.
