To counter CMA (Competition and Markets Authority) blocking Microsoft – Activision Blizzard acquisition, Microsoft struck a deal with Ubisoft to give them the non-exclusive cloud streaming rights for Call of Duty and every other Activision Blizzard game for the next 15 years.

In January 2022, Microsoft bought Activision Blizzard for a whopping $68.7 billion. The troubles were only beginning for the approval of the largest tech deal ever as Microsoft has had to jump several hoops to retain the deal. First they faced the Federal Trade Commission (FTC) who lost the appeal in the US court to pause the merger. The UK’s equivalent – Competition and Markets Authority (CMA), however, rejected the arguments against Microsoft and has successfully blocked the merger sticking to its original decision in April. 

To appease the CMA Microsoft two days ago announced that they would not acquire the cloud streaming rights to all current Activision games and the and future releases for the next 15 years (excluding in the European Economic Area [EEA]). Instead the cloud streaming rights will be divested to Ubisoft prior to Microsoft’s acquisition of Activision.

“Ubisoft will compensate Microsoft for the cloud streaming rights to Activision Blizzard’s games through a one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage,” explained Brad Smith, the Vice Chairman of Microsoft. “It will also give Ubisoft the opportunity to offer Activision Blizzard’s games to cloud gaming services running non-Windows operating systems.”

After this announcement the CMA has again launched an investigation on this new restructure.

CMA succeeds where FTA failed

The FTC’s case was that the deal would unfairly harm competition in the gaming market and insisted that Microsoft was going to remove Call of Duty from Playstation if the acquisition came to fruition. The judge shot down the claims citing lack of evidence. The CMA took a different route where they questioned Microsoft’s dominance in the nascent cloud market after the acquisition. 

Microsoft said,  “Today we have notified the restructured transaction to the CMA and anticipate that the CMA review processes can be completed before the 90-day extension in its acquisition agreement with Activision Blizzard expires on October 18.”

Both FTC and CMA’s intentions, though good, isn’t making any difference in this case as the cloud streaming space is very small yet accounting for only 890 million and the major players are Nvidia, Nintendo, Sony and Ubisoft.

But, Microsoft found a way

The Microsoft-Ubisoft partnership is a roundabout way for Microsoft to access the cloud rights without really owning it. The alliance was only to address the concerns of the regulators and wouldn’t really make a difference to the gamers. While some say it is a win for consumers as it means you won’t need to buy an Xbox to play Activision games since they’ll be available cross-platform anyway. 

Activision and Blizzard merged way back in 2008, together they make some of the most played games including Call of Duty, Candy Crush, Warcraft, Diablo etc. Microsoft’s pursuit of the Activision deal is driven by its ambition to solidify its standing in the gaming industry. Although currently ranked third globally this strategic move would position Microsoft to contend fiercely with major players like Sony, granting the company a potent foothold in the gaming arena.

Over the years, Microsoft has focused on building their foothold on games that don’t require high powered devices, instead consumers can use their phones and laptop. With this acquisition, Microsoft is reinforcing the idea that games can be played on all sorts of devices as Activision Blizzard has plenty of options.

A crucial facet of this endeavor is the reinforcement of Xbox Game Pass, Microsoft’s subscription service that offers gamers access to a library of titles. The integration of Activision’s games into the service would render Xbox Game Pass even more alluring, leading to an expansion of its already large subscriber base. This aligns with Microsoft’s goal of providing gamers with a comprehensive and attractive gaming experience.

Ubisoft with this new licensing agreement will allow Microsoft to sell the cloud gaming rights for current and future Activision Blizzard games to Ubisoft. This means that Ubisoft will be able to stream Activision Blizzard games on its own cloud gaming platform, Ubisoft+. It will also give Ubisoft the right to distribute Activision Blizzard games on other cloud gaming platforms.