Microsoft becomes a gaming giant with a 69 billion deal

Microsoft is one step closer to acquiring video game giant Activision Blizzard. San Francisco Judge Jacqueline Scott Corley on Tuesday denied the FTC’s request to block the deal with an injunction.

The US competition regulator FTC had already filed a lawsuit in December to prevent the deal. Microsoft rival Sony had previously lobbied fiercely against the acquisition.

EU competition watchdogs welcome takeover

With the verdict, Microsoft could initially complete the acquisition, which costs about $ 69 billion, even if there is still an agreement with the British regulator. This had blocked the deal in April. The reason is concerns that the acquisition could distort competition in the growing cloud gaming market. The competition watchdogs of the European Commission, on the other hand, approved the acquisition subject to conditions in May.

EU Competition Commissioner Margrethe Vestager said Microsoft’s commitment not to exclude gamers from other platforms from Activision Blizzard games for the next decade has “significant pro-competitive effects”.

Microsoft, which already has game studios with well-known titles such as “Minecraft” under its roof, would significantly strengthen its market position with Activision Blizzard. With the acquisition, the Xbox Group wants to secure other well-known brands such as “Call of Duty”, “Diablo”, “Starcraft” or “World of Warcraft”.

“Call of Duty” remains on the Playstation

The FTC believes the deal would give Microsoft too much market power in the video game business. However, Judge Corley concluded that the FTC could not provide sufficient evidence. She’s clearly sided with Microsoft for their promises to keep Call of Duty on Sony’s Playstation and even expand the game to the Nintendo Switch. That might be bad for Sony. But good for ‘Call of Duty’ players and future players,” said the judge.

The judge was also apparently convinced of Microsoft’s commitment to make Activision Blizzard games available for cloud gaming services from other providers. The competition watchdogs in the US and UK, on ​​the other hand, fear that the merger will make Microsoft too strong, especially in the cloud gaming sector.

The judge was not convinced that the deal would allow Microsoft to dominate the console market: Microsoft sells significantly fewer game consoles worldwide than Sony or Nintendo. However, Sony argues that many gamers would buy a console solely because of “Call of Duty” and that the deal would give Microsoft too much of a competitive advantage. Microsoft countered that they wanted to bring Activision Blizzard games to as many platforms as possible, including Sony’s Playstation.

Microsoft would become a gaming giant

Activision Blizzard owns numerous major game studios and game brands for PC, consoles and mobile devices. The company’s games attract nearly 400 million players every month. About 245 million of these are attributable to “Candy Crush” developer King, which was acquired a few years ago.

With the acquisition, Microsoft plans to add significantly more games to its “Game Pass” subscription service for Xbox and PC, which gives users access to a catalog of Xbox and PC games from various providers for a monthly subscription fee. On the other hand, the deal would give Microsoft ownership of the hugely successful smartphone game Candy Crush Saga, giving it a foothold in the lucrative mobile games market.

EU forces concession from Microsoft

The EU approved the deal in May on the condition that gamers in the EU have access to current and future Activision Blizzard games for the next ten years. “The commitments fully address the competition law concerns expressed by the Commission,” the European Commission statement said.

If Microsoft were to exclude rivals from “Call of Duty” over the next decade, it would draw the concentrated ire of gamers and cartel watchdogs.

This is unlikely to happen: the EU’s competition watchdog insists that Microsoft has incentives to offer Activision games for Sony’s Playstation, as the competitor’s console sells four times as much as its own Xbox. In plain language: Microsoft would cut itself in the flesh if it didn’t offer the games for other platforms.

Microsoft’s commitment to continue offering Activision games on rival consoles and cloud gaming services will hurt Xbox sales. In the long run, however, this tactic should bring more cash to the box office with game sales and revenue from subscriptions and cloud gaming services. With the tempting prospect of becoming the “Netflix for gamers,” Microsoft should be able to bear selling fewer consoles than Sony and Nintendo.

How it goes on

Following the court defeat, the FTC said it would announce “in the coming days” next steps “to continue our fight to preserve competition and protect consumers.”

Microsoft and Activision Blizzard announced the acquisition in January 2022. With the verdict in the US, the deal could be dry on July 18, 2023. A few minutes after the US judge’s ruling, Microsoft and the UK regulator have agreed to suspend their legal battle – as in the EU – in order to reach a negotiated solution. In theory, Microsoft could now complete the deal without the UK, but this is not a desirable scenario for either side.

If the court order holds, it would be the second major defeat for FTC Chairman Lina Khan. Since her confirmation as chief of the regulator in 2021, Khan has been chasing big tech companies.

Activision Blizzard is a gaming company based in Santa Monica, California. The American company was created in 2008 from the merger of publisher Activision with Vivendi Universal Games and is the market leader in terms of sales in the computer and video games sector.

With material from the SDA, AWP and DPA news agencies.