Microsoft has received “unconditional approval” from China for its plan to acquire video game company Activision Blizzard. This news comes despite the deal facing continuing antitrust opposition in the U.S. and the United Kingdom. The situation in China is particularly complex due to Activision Blizzard's recent cessation of many game offerings in mainland China due to a dispute with its local publishing partner.
Global Regulatory Responses: Some Approvals, Some Challenges
China joins the European Union as the most significant economies to green-light Microsoft's planned $69 billion takeover of the California-based game publisher, known for popular titles like World of Warcraft, Call of Duty, and Candy Crush.
The EU, representing a 27-nation bloc, approved the deal conditionally. Microsoft was required to make commitments intended to enhance competition in the growing cloud-based gaming market. These commitments include:
- A free license to consumers in EU countries 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 that they have a license for.
- A free license to cloud providers to stream these games in EU markets. Also a global license that will not be free for cloud providers outside of the EU.
- These licenses mean that consumers in EU countries will have a right to stream Activision Blizzard games they've purchased or subscribe to on “any cloud game streaming service of their choice and play them on any device using any operating system.[…] The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.”– Brad Smith, Vice Chair and President.
China's Clearance Amid Game Sale Challenges
China's State Administration for Market Regulation granted approval without conditions, according to a Microsoft statement to IGN. This clearance has added complexity given the requirement in mainland China for game-makers to work with a Chinese publisher for releasing titles in the country.
Popular Activision Blizzard franchises such as World of Warcraft, the StarCraft series, Overwatch, and Diablo have been suspended earlier this year due to a disagreement between Activision subsidiary Blizzard Entertainment and its Chinese partner, NetEase.
Rift with Local Partner NetEase
Blizzard had an enduring partnership with NetEase since 2008, which assisted the latter in becoming China's second-largest games distributor after Tencent. A public spat occurred following the U.S. company's announcement last year of suspending most of its game services in China after current licensing agreements concluded.
Despite the roadblocks, Microsoft's planned acquisition of Activision — deemed the most expensive tech deal in history — has received approval in 37 countries, including the EU's 27 nations and 10 others such as China, Japan, and Brazil. However, the monumental deal is still at risk as British regulators have rejected it, and U.S. authorities are actively opposing it.
Ongoing Opposition and Future Prospects
The approval in 37 countries so far represents more than two billion people worldwide. However, the UK's Competition and Markets Authority (CMA) has blocked the deal on the grounds of potential monopolization of the emerging cloud gaming market by Microsoft, who has stated its intent to appeal the UK's decision.
The Competition and Markets Authority (CMA) said that “Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors.” They also said that Microsoft's plans to address their concerns were not effective and would have replaced competition with ineffective regulation. Microsoft is appealing the decision.
The decision came as a surprise as the CMA had previously suggested it was happy with Microsoft's concessions. One of the main concerns about the acquisition was Microsoft taking control of the Call of Duty franchise. While Activision Blizzard has other major brands, such as Diablo, Warcraft, and Candy Crush, Call of Duty is the all-conquering game-changer with $30bn+ is lifetime revenue. Following the CMA's ruling, Microsoft went to war with the UK and declared the country closed for business.
Even so, the CMA took a harsh stance considering Microsoft presumably provided the same concessions it did to the European Commission. Those commitments included the company striking 10-year agreements with Nintendo, GeForce Now, Boosteroid, EE in the UK, and others that will keep Call of Duty available across platforms. The company has said that Sony has a similar deal on the table. Although, Sony has been completely against the merger and even said Microsoft would sabotage Call of Duty – which the company deems irreplaceable – on PlayStation.
It is worth remembering the Federal Trade Commission (FTC) has already been clear it is against the deal and is currently suing Microsoft to try and prevent it from going through. The outcome of that lawsuit could define whether the acquisition moves ahead or not. If the FTC relents and approves the merger, and with the EC already on board, there is a chance that the CMA will change its mind or Microsoft stands more chance of winning the appeal.
You can keep track of all aspects of this deal, past, present, and future by checking out our Microsoft Activision Blizzard merger timeline stories. Alternatively, check out Microsoft's official hub.
