Microsoft Activision Blizzard deal: Why the UK CMA blocked initial acquisition and what's changed

Microsoft’s massive Activision Blizzard acquisition has now been given approval by a UK regulator to go ahead – but what changed?

Microsoft’s move to acquire Activision Blizzard has been approved by the UK’s Competition and Markets Authority (CMA), putting an end to a six month battle between the watchdog and tech giant.

The CMA said that the Xbox owner can now go ahead with one of the technology sector’s largest takeover deals after Microsoft revised their initial offer.

But why was the deal blocked in the first place?

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Why the Microsoft Activision deal was blocked by the CMA

The CMA originally blocked the deal, initially worth £56.6 billion ($69 billion) due to the scale of the acquisition. There were fears surrounding potential effect on market share, given that Microsoft already owns Xbox, surrounding console gaming.

Regulators argued that Microsoft could make Activision Blizzard games – including the Call of Duty franchise – exclusive to its own consoles, and hurting competition with rivals such as Sony or Nintendo.

Call of Duty. Image: ActivisionCall of Duty. Image: Activision
Call of Duty. Image: Activision | Activision

Concerns were also raised it would grow Microsoft's share of the cloud gaming market, which is why the CMA in the UK blocked the deal in April.

In addition to purchasing Activision Blizzard, Microsoft also owns 343 Industries, the makers of Minecraft and Halo, Obsidian Entertainment, Playground Games and ZeniMax, the owner of Bethesda, which just released Starfield.

What changed?

In a new deal put forward by Microsoft, the tech giant will not purchase the cloud gaming rights held by Activision. Instead they will be sold to an independent third party, Ubisoft Entertainment SA (Ubisoft), who will distribute the games on consoles and PC.

Sarah Cardell, chief executive of the CMA, said: “With the sale of Activision’s cloud streaming rights to Ubisoft, we’ve made sure Microsoft can’t have a stranglehold over this important and rapidly developing market.

“As cloud gaming grows, this intervention will ensure people get more competitive prices, better services and more choice. We are the only competition agency globally to have delivered this outcome.”

Ubisoft will distribute Activision Blizzard games for cloud gaming. Image: AdobeUbisoft will distribute Activision Blizzard games for cloud gaming. Image: Adobe
Ubisoft will distribute Activision Blizzard games for cloud gaming. Image: Adobe | HTGanzo - stock.adobe.com

By selling Activision’s cloud streaming rights to Ubisoft, the CMA have said the move will prevent the distribution of games such as Call of Duty, Overwatch and World of Warcraft from remaining solely under the control of Microsoft – stopping the firm from limiting access to Activision’s catalogue of games to Microsoft’s cloud gaming service and therefore withholding titles from rivals.

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Ubisoft will therefore be able to offer Activision’s games directly to consumers and cloud gaming providers, whether it’s buy-to-play or game subscription services.

The deal will also require Microsoft to port Activision games to operating systems other than Windows, with support for emulators provided when requested.

What happens now that Microsoft owns Activision Blizzard?

When the merger was first announced it was rumoured that Microsoft were interested in becoming more involved with the metaverse and securing their status in cloud gaming.

In addition, the deal would give Microsoft ownership over intellectual property such as Call of Duty, Overwatch and Warcraft, something which could prove profitable, particularly with the success of The Last of Us television series, alongside the potential to revive franchises such as Guitar Hero.

Microsoft’s involvement with Activision Blizzard also means that the firm will become a major stakeholder in esports, but many analysts believe the largest impact will be seen with the Xbox Game Pass. The subscription service allows users to play Xbox games on consoles, PC and mobile devices, which could see the catalogue of available titles expand with the acquisition of Activision Blizzard.

There are a range of opinions on the matter, with some experts expressing optimism, comparing the deal to Disney's ownership of Marvel, Pixar and Lucasfilm, while others remain wary of what such a deal will encompass for the industry.

When will Activision Blizzard games go on Xbox Game Pass?

Activision Blizzard has said their games will start being added to Xbox Game Pass next year, sharing on X: “While we do not have plans to put Modern Warfare® III or Diablo IV into Game Pass this year, once the deal closes, we expect to start working with Xbox to bring our titles to more players around the world. And we anticipate that we would begin adding games into Game Pass sometime in the course of next year.”

It is worth noting, however, that there is a deal regarding the Call of Duty franchise being available on PlayStation for at least the next ten years.