EU approves Microsoft’s acquisition of Activision Blizzard

The European Commission—the body overseeing the Microsoft and Activision Blizzard merger—approved the $68.7 billion deal to go forward, as long as the companies throw a competitive bone to other publishers along the way.

The commission said that Microsoft and Activision Blizzard had both agreed to offer free licenses to allow users to stream any of the bought out publisher’s properties on “any cloud game streaming service. This includes all future Activision Blizzard titles for the next 10 years.

Some of these concessions included allowing licenses for big franchises like Call of Duty and Candy Crush to competing cloud gaming services based in the European Economic Area. This includes countries in the European Union as well as Iceland, Liechtenstein, and Norway.

The regulatory body said this would “ensure that Activision’s games available for streaming will have the same quality and content as games available for traditional download.”

“The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth,” Executive VP of the European Commission’s competition policy Margrethe Vestager said.

The Commission’s preliminary investigation found that Microsoft could harm competition in the distribution of console and PC video games, including multi-game subscription services and cloud game streaming services; and (ii) in the supply of PC operating systems.

The Commission’s in-depth market investigation indicated that Microsoft would not be able to harm rival consoles and rival multi-game subscription services. At the same time, it confirmed that Microsoft could harm competition in the distribution of games via cloud game streaming services and that its position in the market for PC operating systems would be strengthened.

In particular, the Commission found that:

Microsoft would have no incentive to refuse to distribute Activision’s games to Sony, which is the leading distributor of console games worldwide, including in the European Economic Area (‘EEA’) where there are four Sony PlayStation consoles for every Microsoft Xbox console bought by gamers. Indeed, Microsoft would have strong incentives to continue distributing Activision’s games via a device as popular as Sony’s PlayStation.

Even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market. Even if Call of Duty is largely played on console, it is less popular in the EEA than in other regions of the world, and is less popular in the EEA within its genre compared to other markets. Therefore, even without being able to offer this specific game, Sony could leverage its size, extensive games catalogue and market position to fend off any attempt to weaken its competitive position.

Even without this transaction, Activision would not have made its games available for multi-game subscription services, as this would cannibalize sales of individual games. Therefore, the situation for third-party providers of multi-game subscription services would not change after the acquisition of Activision by Microsoft.

The acquisition would harm competition in the distribution of PC and console games via cloud game streaming services, an innovative market segment that could transform the way many gamers play video games. Despite its potential, cloud game streaming is very limited today. The Commission found that the popularity of Activision’s games could promote its growth.

Instead, if Microsoft made Activision’s games exclusive to its own cloud game streaming service, Game Pass Ultimate, and withheld them from rival cloud game streaming providers, it would reduce competition in the distribution of games via cloud game streaming.

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. This could be the case, should Microsoft hinder or degrade the streaming of Activision’s games on PCs using operating systems other than Windows.

The proposed remedies

To address the competition concerns identified by the Commission in the market for the distribution of PC and console games via cloud game streaming services, Microsoft offered the following comprehensive licensing commitments, with a 10-year duration:

• A free license to consumers in the EEA that would allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license.
• A corresponding free license to cloud game streaming service providers to allow EEA-based gamers to stream any Activision Blizzard’s PC and console games.

Today, Activision Blizzard does not license its games to cloud game streaming services, nor does it stream the games itself. These licenses will ensure that gamers that have purchased one or more Activision games on a PC or console store, or that have subscribed to a multi-game subscription service that includes Activision games, have the right to stream those games with any cloud game streaming service of their choice and play them on any device using any operating system.

The remedies also ensure that Activision’s games available for streaming will have the same quality and content as games available for traditional download.

These commitments fully address the competition concerns identified by the Commission and represent a significant improvement for cloud game streaming compared to the current situation. They will empower millions of EEA consumers to stream Activision’s games using any cloud gaming services operating in the EEA, provided they are purchased in an online store or included in an active multi-game subscription in the EEA.

In addition, the availability of Activision’s popular games for streaming via all cloud game streaming services will boost the development of this dynamic technology in the EEA. Ultimately, the commitments will unlock significant benefits for competition and consumers, by bringing Activision’s games to new platforms, including smaller EU players, and t

Last month, the Competition and Markets Authority (CMA) in the UK blocked Microsoft’s deal to acquire Activision Blizzard.

Both Microsoft and Activision said they would appeal the decision, further mentioning they were willing to offer these or similar concessions to British regulators.