An Activision Blizzard’s Call of Duty: Modern Warfare video game is inserted into the Microsoft’s Xbox One video game console arranged in Denver, Colorado, on Wednesday, Jan. 19, 2022.
Michael Ciaglo | Bloomberg | Getty Images
Shares of Activision Blizzard surged Friday, after the U.K.’s Competition and Markets Authority narrowed the scope of its investigation into Microsoft‘s takeover of the games publisher.
The event marks a partial win for Microsoft, because it pursues an expansion of its video game business. The Redmond, Washington-based technology giant has deepened its give attention to gaming through blockbuster acquisitions, corresponding to its purchase of ZeniMax Media, the parent company of Bethesda Softworks.
In February, the CMA published provisional findings from its probe into the takeover, stating on the time that the transaction may end in higher prices, fewer selections and fewer innovation. Amongst its concerns, the regulator flagged that the deal would cause a considerable lessening of competition within the console gaming market.
Since then, the regulator has received a “significant amount” of feedback from various industry participants on the deal. With this recent evidence, the CMA now says it not believes the transaction will hamper competition in console games.
“Having considered the extra evidence provided, we’ve now provisionally concluded that the merger is not going to end in a considerable lessening of competition in console gaming services because the price to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such motion,” Martin Coleman, chair of the independent panel of experts conducting the CMA investigation, said in an announcement Friday.
“Our provisional view that this deal raises concerns within the cloud gaming market isn’t affected by today’s announcement. Our investigation stays on track for completion by the tip of April.”
Shares of Activision Blizzard were up greater than 5% in morning trading within the U.S., after earlier surging greater than 7% to a recent 52-week high. Microsoft’s stock declined barely amid a broad market slump.
Call of Duty distribution in focus
The CMA announcement comes after the U.S. technology giant has also won support from some corporations that were against the deal, or sitting on the fence.
Certainly one of the main concerns from Microsoft’s competitors was that the transaction would block distribution access to Activision’s crown jewel franchise — Call of Duty. Last month, Microsoft said it signed a “binding 10-year legal agreement” to bring Call of Duty to Nintendo players on the identical day as Microsoft’s Xbox, “with full feature and content parity.”
Moreover, Microsoft signed a cope with Nvidia to bring its Xbox games to Nvidia’s GeForce Now cloud gaming service. Microsoft said it could also bring the Activision games library to Nvidia’s service, if the acquisition closes. Nvidia was reportedly against Microsoft’s Activision takeover.
But Microsoft has yet to bring onside its biggest rival, Sony, which owns the PlayStation console. Microsoft President Brad Smith told CNBC last month that the corporate is offering Sony the identical agreement because it did Nintendo — to make Call of Duty available on PlayStation concurrently on Xbox, with the identical features. Sony still opposes the deal.
“We appreciate the CMA’s rigorous and thorough evaluation of the evidence and welcome its updated provisional findings,” a Microsoft spokesperson told CNBC via email.
“This deal will provide more players with more selection in how they play Call of Duty and their favorite games. We sit up for working with the CMA to resolve any outstanding concerns.”
An Activision spokesperson told CNBC that the CMA’s updated provisional findings “show an improved understanding of the console gaming market and show a commitment to supporting players and competition.”
“Sony’s campaign to guard its dominance by blocking our merger cannot overcome the facts, and Microsoft has already presented effective and enforceable remedies to handle each of the CMA’s remaining concerns. We all know this deal will profit competition, innovation, and consumers within the UK.”
Microsoft isn’t completely off the hook.
The CMA says it still has reservations in regards to the deal because it pertains to cloud gaming, where delivery of games content is handled from distant servers reasonably than from a tool’s internal memory. Notably, cloud gaming remains to be in its infancy and never yet a mass-market technology.
In its provisional conclusions, the CMA suggested that Microsoft may have to divest part or all of Activision — or its CoD franchise alone — to resolve its concerns. The CMA didn’t provide an update as as to if it believes this stays a possible resolution.
The watchdog will make its final decision on April 26.
Microsoft also still faces uncertainty from regulators within the U.S. and European Union. Smith traveled to Brussels last month to fulfill with EU regulators. Within the U.S., the Federal Trade Commission filed an antitrust case against Microsoft attempting to dam the Activision deal.
Some major corporations retain reservations in regards to the acquisition, which incorporates Google parent Alphabet, in response to Bloomberg.
— CNBC’s Steve Kovach contributed to this report.