Microsoft submits new Activision Blizzard takeover deal to British regulator after initial block
Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard’s games character.
Dado Ruvic | Reuters
Microsoft on Tuesday submitted a new deal for the takeover of Activision Blizzard, offering a spate of concessions after U.K. regulators rejected its initial proposal.
The U.S. technology giant first put forward the $69 billion acquisition of Activision in January 2022, but has since faced regulatory challenges in the U.S., Europe and U.K.
On Tuesday, the U.K.’s Competition and Markets Authority confirmed it has blocked the original deal. However, it said Microsoft and Activision have agreed to a new, restructured agreement, which the CMA will now investigate with a decision deadline of Oct. 18.
The Redmond, Washington-based tech giant anticipates the review can be completed before this time, Microsoft President Brad Smith said in a Tuesday statement.
Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years, the CMA said. Instead, these rights will be divested to French game publisher Ubisoft Entertainment before Microsoft’s acquisition of Activision, the CMA added.
Ubisoft shares were up more than 9% in Europe trade. Shares of Activision were up 1%, while Microsoft rose less than 1% in early U.S. trading.
The CMA has been the toughest critic of the takeover, citing concerns that the deal would hamper competition in the nascent cloud gaming market.
Cloud gaming is seen as the next frontier in the industry, offering subscription services that allow people to stream games just as they would movies or shows on Netflix. It could even remove the need for expensive consoles, with users playing the games on PCs, mobile and TVs instead.
Regulators previously argued that Microsoft could also take key Activision games, like Call of Duty, and make them exclusive to Xbox and other Microsoft platforms.
Authorities in the European Union were the first major regulator to clear the deal back in May. To cross that line, Microsoft offered concessions, such as offering royalty-free licenses to cloud gaming platforms to stream Activision games, if a consumer has purchased them.
The CMA refused similar measures at the time, which it felt would allow Microsoft to “set the terms and conditions for this market for the next ten years.”
In the U.S., the Federal Trade Commission was fighting a legal battle with Microsoft in an effort to get the Activision takeover scrapped. In July, a judge blocked the FTC’s attempt to do so, clearing the way for the deal to go ahead in the U.S.
Just hours later, the CMA said it was “ready to consider any proposals from Microsoft to restructure the transaction” and allay the regulator’s concerns.
Microsoft’s new proposal to the U.K.
The restructured deal and cloud rights divestment to Ubisoft are intended to provide an independent third-party content supplier with the ability to supply Activision’s gaming content to all cloud gaming service providers, including to Microsoft itself.
Ubisoft will be able to license out Activision content under different business models, including subscription services.
The deal would also require Microsoft to provide versions of games on operating systems other than Windows, which it owns.
“Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously,” Sarah Cardell, CEO of the CMA, said in a statement.
“As part of this new deal, Activision’s cloud streaming rights outside of the EEA (European Economic Area) will be sold to a rival, Ubisoft, who will be able to license out Activision’s content to any cloud gaming provider. This will allow gamers to access Activision’s games in different ways, including through cloud-based multigame subscription services.”
Cardell emphasized this is not a signal of an approval for the deal.
“This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments.”
For its part, Microsoft will be compensated for its divestment to Ubisoft “through a one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage. It will also give Ubisoft the opportunity to offer Activision Blizzard’s games to cloud gaming services running non-Windows operating systems,” Smith said Tuesday.
“We’re dedicated to delivering amazing experiences to our players wherever they choose to play,” Chris Early, senior vice president of strategic partnerships and business development at Ubisoft, said on Tuesday. “Today’s deal will give players even more opportunities to access and enjoy some of the biggest brands in gaming.”
President of Microsoft North America Judson Althoff speaks on stage during We Day at KeyArena on April 23, 2015 in Seattle, Washington.
Mat Hayward | Getty Images
Microsoft‘s top-ranking sales leader, Judson Althoff, has been promoted to a bigger role as CEO of the company’s commercial business.
Satya Nadella, Microsoft’s CEO, wrote in a memo on Wednesday that marketing and operations will move under Althoff’s organization. Most of Microsoft’s revenue comes from commercial offerings such as productivity software subscriptions and cloud-based Nvidia chips for running artificial intelligence models.
“Our success depends on enabling commercial and public sector customers and partners to combine their human capital with new AI capabilities to change the frontier of how they operate,” Nadella wrote in the email. “To accelerate this, we will increasingly need to bring together sales, marketing, operations, and engineering to drive growth and strengthen our position as the partner of choice for AI transformation.”
Althoff, who joined from Oracle as president of Microsoft’s North America business in 2013, was already among Microsoft’s highest-paid executives, receiving over $23 million in total pay in the 2024 fiscal year. His most recent title was executive vice president and chief commercial officer.
Under Nadella, who replaced Steve Ballmer as CEO in 2014, Microsoft has more frequently used the CEO title for select executives.
LinkedIn has had a CEO since Microsoft acquired the company in 2016. Last year Microsoft hired Mustafa Suleyman, a co-founder of the DeepMind AI lab now owned by Google, and made him CEO of a group called Microsoft AI that includes Bing. And GitHub, which Microsoft bought in 2018, had a CEO until last month, when Thomas Dohmke left the company.
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Yusuf Mehdi, executive vice president and consumer chief marketing officer at Microsoft, speaks at a company briefing in Redmond, Wash., on May 20, 2024. Microsoft unveiled a new category of PC that features generative artificial intelligence tools built into Windows, the company’s world-leading operating system.
Jason Redmond | AFP | Getty Images
Microsoft said Wednesday that it will stop promoting a consumer subscription for artificial intelligence services and introduced a bundle blending AI features with traditional productivity apps.
The software company introduced Copilot Pro at $20 per month in early 2024. Microsoft 365 Family, which allows for up to six users and 6 terabytes of cloud storage, goes for $12.99 each month. The new Microsoft 365 Premium tier essentially combines both and will cost $19.99 a month.
“Other AI tools stop at chat — we deliver that plus so much more,” Yusuf Mehdi, Microsoft’s consumer marketing leader, wrote in a statement provided to CNBC.
Microsoft is not discontinuing Copilot Pro, a spokesperson said.
Technology companies have been trying to capitalize on the broad interest in tapping generative AI models to compose documents and create videos.
Microsoft offers a free version of its Copilot assistant, in line with Anthropic, Google and OpenAI, all of which sell paid subscriptions for consumers.
Microsoft 365 Premium comes with higher usage limits than the free Copilot and productivity software subscriptions targeting consumers.
As was the case with Copilot Pro and with consumer Microsoft 365 subscriptions, the new offering enables conversations with Copilot in Microsoft’s Office apps such as Word, Excel and PowerPoint.
Microsoft is sweetening the new offer with forthcoming access to two AI reasoning agents that so far have only been available to corporate workers with Microsoft 365 Copilot subscriptions.
OpenAI relies on Microsoft’s Azure cloud to run its ChatGPT assistant and its underlying models, and Microsoft incorporates the models into its Copilot. Microsoft has invested more than $13 billion in OpenAI. The companies are partners that also compete.
Microsoft reported 89 million consumer subscribers for Microsoft 365 services in the June quarter, up 8%. Revenue growth from those products has accelerated for three quarters in a row, reaching 20% in the June quarter.
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