Microsoft announced in January 2022 that it had plans to buy Activision Blizzard, one of the world’s largest game publishers, for $68.7 billion (£55 billion).
That’s a much higher figure than the $7.5 billion (£6 billion) he paid for Bethesda Gameworks two years earlier. The proposed Activision Blizzard takeover was not much simpler, prompting scrutiny from competition watchdogs and Microsoft’s console rival Sony.
Things are moving fast too. On April 26, the CMA (Competition and Markets Authority) monopolies watchdog blocked the takeover over concerns it would hinder competition in the UK’s cloud gaming market.
The position of the watch was against their global counterparts. The deal has been approved by regulators in Saudi Arabia, Brazil, Chile, Serbia, Japan and South Africa. Crucially, the CMA’s decision comes ahead of upcoming rulings from EU and US regulators, and could change their positions on the market.
Things aren’t looking good for Microsoft – but why does it want to buy Activision Blizzard, and why is it so difficult?
Read on to find out more.
What games does Activision Blizzard make?
The biggie is Call of Duty or ‘CoD’. The military first-person shooter is one of the most popular games on the planet, and there’s always a lot of excitement when a new entry is released.
But both Activision and Blizzard have been in the business for years, and have plenty of beloved franchises beyond CoD. These include Warcraft, Overwatch, and even Candy Crush, following the 2016 acquisition of mobile game maker King.
Here are the main ones:
These are just the main players, and there are plenty of long-forgotten IPs that could be revived: think Quest King, Blur, Gabriel Knight, True Crime, and Gun.
Why does Microsoft want to buy Activision Blizzard?
Although it was known exclusively for home computer software (Windows, Office, Outlook, Word, etc.) Microsoft now has a finger in many pies – and gaming is one of the biggest, thanks to a division Xbox gaming.
That would be reason enough to try to bring one of the biggest publishers in the world into the fold, with exclusive games often helping to decide the console wars as Microsoft fights a battle against lost to Sony PlayStation 5.
But popular franchises such as Call of Duty, Overwatch, and Warcraft are part of Microsoft’s stable, particularly notable because of the company’s big bet on Game Pass. This is the ‘Netflix of games’, where you can play a rolling selection of titles for a low-cost monthly subscription.
Microsoft games – including Gears of War, Forza, Halo, and Minecraft – are already included. The company would love to add Activision titles to the platform to increase the number of subscribers.
What is the problem with Microsoft buying Activision Blizzard?
The problem is about competition. By acquiring Activision Blizzard, critics argue, Microsoft’s gaming division would own too much of the industry, unfairly restricting its competitors and ultimately harming consumers.
In the United States, the Federal Trade Commission (FTC) is trying to block the deal, and voted unanimously to issue a complaint against the buyout. In the UK, the CMA has concluded that the move would ultimately lead to higher prices, fewer choices and less innovation for UK gamers.
It also found deficiencies in the regulatory solutions proposed by Microsoft in its attempt to achieve the merger. The cloud gaming tech giant has signed deals with Boosteroid, Ubitus, and Nvidia to bring Xbox PC games to these services. It signed a similar deal with Nintendo last December.
A large part of the problem comes from exclusivity. To get the most out of an acquisition, many assume that Microsoft would have to make future titles from Activision Blizzard exclusive to Xbox and PC, which would prevent Playstation gamers.
In terms of precedent for that, Microsoft announced that Bethesda’s first game as a Microsoft studio – Starfield – will not appear on PS5. Fallout of Elder Scrolls seems unlikely in the future either.
That said, Microsoft has not pulled Minecraft from Sony or Nintendo platforms since it bought the game back in 2014. And for its part, as part of the ongoing argument, Microsoft offered Call of Duty – the main prize to keep the competition on competitors. – on Sony and Nintendo platforms for ten years after the deal ends.
Microsoft president Brad Smith made the promise in an opinion piece for the Wall Street Journal in December. He said the deal was good for gamers because Microsoft was “third in console gaming, stuck behind Sony’s dominant PlayStation and the Nintendo Switch”.
What would Microsoft’s purchase of Activision Blizzard mean for big games like World of Warcraft?
Those reassurances aside, the concern for Microsoft’s competitors is that big franchises will be exclusive to Xbox and PC, or they’ll be dabbling in other formats with weaker performance or less DLC.
Even if Microsoft were to continue releasing its games on other formats, its rivals are concerned that they cannot compete with the Game Pass offering, where the £60 RRP is replaced by a flat monthly subscription.
Blizzard games such as World of Warcraft and Starcraft, which never had a console version, could also be pushed to Xbox in time. Although Microsoft has significant interest in Windows PCs, this is not necessarily an urgent priority.
Is Microsoft’s takeover of Activision likely to go ahead?
Back in September, Microsoft CEO Satya Nadella said Bloomberg that he was “very, very confident” that the Activision Blizzard buyout would go through. “Of course, any acquisition of this size will be scrutinized but we feel very confident that we will come out,” he said.
But that was before the FTC moved to block the deal and the CMA ruled against it. This was despite the fact that the UK watchdog recently dropped many of its concerns about the upcoming takeover (especially regarding the fate of Activision’s biggest hit Call of Duty).
Martin Coleman, chairman of the independent panel of experts conducting this investigation, said in a statement: “Microsoft already has a powerful position and leadership over other competitors in cloud gaming and this move would strengthen that advantage, enabling undermine new and innovative competitors.”
He added: “Cloud gaming needs a free, competitive market to drive innovation and choice. This is best achieved by allowing the current competitive dynamics in cloud gaming to continue their work.”
Now, the path forward is more difficult. For its part, Microsoft is working with Activision to appeal the UK decision in an attempt to overturn it.
Brad Smith, Vice Chairman and President, said in a statement: “We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technological innovation and investment in the UK.
“We have already signed contracts to make Activision Blizzard’s popular games available on another 150 million devices, and we remain committed to strengthening these agreements through regulatory solutions.”
He added: “We are particularly disappointed that, after much discussion, this decision appears to reflect a flawed understanding of this market and how the relevant cloud technology actually works.”
The EU is due to make a decision by 22 May. He is expected to approve the deal following Nvidia and Nintendo’s licensing agreements.
What does this mean for gamers?
People who feared that Microsoft would renege on its promise to make Activision games widely available will be happy today.
PlayStation owners, in particular, may have been skeptical of Microsoft’s assurances of keeping CoD on Sony consoles for 10 years. In fact, Microsoft has already indicated that it is not interested in extending that commitment. He said that ten years was plenty of time for Sony to create a CoD rival, indicating that it was willing to pull the rug out from its rivals as soon as the timer ran out.
The UK decision also casts doubt on Microsoft’s plans to add Activision games to other gaming platforms, including Nintendo consoles.
In order to capitalize on controllers, the tech giant struck high-profile deals to bring Xbox PC and Activision franchises, including CoD and Overwatch, to competing platforms. They included 10-year contracts with cloud gaming services including NVIDIA Geforce Now, and smaller rivals such as Boosteroid and Ubitus. It also reached a similar deal with Nintendo in December.
If Microsoft loses its appeal, Activision will essentially have to find similar licensing deals with these distributors. Given that the company pulled its games from GeForce Now in 2020, and hasn’t reinstated them since, it’s clear that cloud gaming has some skepticism.
Meanwhile, Microsoft’s Nintendo contract felt like lip service to controllers. The Japanese company is mostly associated with family titles like Mario, and they already have access to Activision’s Overwatch games. So CoD felt like an anomaly for Nintendo. The Switch also lacks the computing power to run the latest CoD games.
All told, Activision will have little incentive to pursue a deal like Nintendo if the merger falls apart.