Microsoft–Activision Blizzard Deal Still In Purgatory

Photo Credit: Activision via The Business Journals

Microsoft announced its intention to purchase the video game company Activision Blizzard on Jan. 18, 2022. Now, a year and a half later, the deal is still pending. Microsoft announced in a press release that the acquisition would cost the company $68.7 billion, adding to Microsoft's lengthy history of expensive gaming acquisitions. 

Activision Blizzard, one of the largest gaming conglomerates in the world, is no stranger to large-scale acquisitions. Activision and Blizzard, originally two separate firms, merged to form the corporation that exists today. The company is primarily known for its popular franchises, including Call of Duty, Overwatch, Diablo, World of Warcraft as well as several other games.

The Activision Blizzard acquisition has faced opposition from several governmental organizations as well as other video game companies. Sony is one prominent voice against the acquisition, including supporting a gamer-led lawsuit against it. Both the United States’ Federal Trade Commission (FTC) and the United Kingdom’s Competition and Markets Authority (CMA) have found issue with the acquisition as well, citing the lack of competition in the field as the primary issue. Both the CMA and FTC claim the acquisition will harm the newly-developing cloud gaming market, with the FTC also claiming it would damage the high-end console market. 

The CMA also had initial concerns with the deal’s impact on the console market, however, it has since removed the contentions. The majority of the FTC’s concern with the impact on the console market stems from the danger of a monopoly, given Activision’s far reach in the gaming community. The FTC was concerned that Microsoft could “[withhold] content from competitors entirely”.

The EU, which despite initial concerns, passed the acquisition, found that Microsoft “would have no incentive to refuse to distribute Activision’s games to Sony”, and “even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market.”

Cloud gaming is a category of online gaming where games are run on remote servers and streamed directly to consumer devices. The cloud gaming market remains the single largest concern that has caused the CMA and FTC to block Microsoft’s acquisition. With Microsoft already controlling an estimated 60 to 70 per cent of the cloud gaming market according to the CMA, both governmental groups were concerned that it could quickly spawn a monopoly. However, Activision Blizzard has mostly strayed far from the cloud gaming market, their only major work being a port of Sekiro: Shadows Die Twice to Google’s defunct Stadia cloud service. 

Microsoft, in an attempt to ease the FTC and CMA’s concerns about the future of cloud gaming and exclusives, made offers to Sony, Nintendo, and Nvidia to bring Xbox titles to their corresponding platforms. Nintendo, and Nvidia, who accepted Microsoft's offer, were  guaranteed 10 years of Xbox titles on the platforms, including Activision Blizzard’s Call of Duty franchise if the acquisition goes through. The deal is notable, as bringing those games to Nvidia’s GeForce Now cloud gaming service, one of Microsoft’s largest competitors, would seemingly curb the CMA’s concerns of Microsoft monopolizing the cloud gaming space. 

As it stands, without the FTC or CMA clearing the acquisition, the deal stands in limbo. On June 12, the FTC filed to prevent the deal from going through before its July 18 termination deadline. If the deal is not completed before the termination deadline, the parties will have to create a new deal, which is why the FTC requested a restraining order and injunction in the US federal court. If Microsoft fails to go through with their acquisition, they could end up paying Activision Blizzard up to $3 billion in termination fees, according to CNBC. 

Microsoft currently also has an appeal against the CMA’s block of the acquisition, which will enter courts around the week of July 24, shortly after the termination deadline.