The European Union has approved the acquisition of Activision Blizzard by Microsoft last year. Microsoft had announced in January 2022 that it was buying the ‘Call of Duty’ maker for $74.5 billion, a deal that was touted as the biggest ever in the gaming industry.
The EU approval came weeks after the UK blocked the acquisition on fears that it would stifle competition in the cloud gaming segment.
Why the Deal is Crucial for Microsoft
The Activision deal was crucial for Microsoft as it would cement the tech major’s position in the gaming world. According to data analytics firm Newzoo, the global gaming market is expected to generate $218.8 billion in revenues by 2024. The firm has said Microsoft’s gaming market share was a paltry 6.5 percent in 2020. By acquiring Activision Blizzard, this share would go up to 10.7 percent.
The tech giant offered $95 per share for Activision, which was a 45 percent premium to its close on the day the deal was announced. “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft Chief Executive Satya Nadella said at that time.
Roadblocks
However, the US Federal Trade Commission said in December 2022 that it was ramping up efforts to block Microsoft’s acquisition of Activision Blizzard. According to the FTC, which filed an antitrust lawsuit against Microsoft, the deal would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.
On Monday, the European Commission, which is the EU’s antitrust regulator, said the approval for the deal hinged on Microsoft guaranteeing full compliance on long-term licensing agreements that allow consumers to continue accessing Activision’s games like ‘Call of Duty.’
The EU regulator said it did not think it was likely that the Microsoft deal for Activision would threaten gaming console market nor harm multi-game subscription services. “Despite its potential, cloud game streaming is very limited today … If Microsoft made Activision’s games exclusive to its own cloud game streaming service, Microsoft could also strengthen the position of Windows in the market for PC operating systems,” the Commission said in a press release.
Rivals’ Concerns
By acquiring Activision Blizzard, Microsoft would become the third-largest gaming company in the world. China’s Tencent and Japanese giant Sony are in the first and second positions.
Mike Blake/Reuters
Sony, which is Microsoft’s gaming rival and the maker of PlayStation, has been actively working to get the Activision deal overturned. Sony says that the Activision deal could result in Microsoft making Call of Duty an Xbox or PC exclusive. According to Yahoo Finance, the sales of Call of Duty: Modern Warfare topped $1 billion in revenues. Microsoft has refuted the charges of Sony, saying it will make Call of Duty available on Sony’s PlayStation.
On Monday, following the EU’s green light, Activision stock rose 1 percent Microsoft shares were flat.
