Microsoft Sells Cloud Gaming To Ubisoft As UK Activision Blizzard Deal Workaround

Microsoft is now seeking to rejig its proposal to purchase Activision Blizzard by simply hacking out the parts of the deal that attracted the ire of the UK Competition and Markets Authority. With those parts gone, the deal can go ahead… Or at least that’s the plan.

The offending parts are connected with cloud gaming, as the UK CMA zoomed in on this aspect of the deal and specifically stating that this was the reason for the deal block that remains in place presently.

The UK CMA felt that given Microsoft’s current presence and debatable lead in the field of cloud gaming – something it feels will only become more important and popular in the coming years – that ownership of Activision Blizzard and its titles (including games franchise giant Call of Duty) would simply give it too much presence and power to hold back rights and access for other parties and players outside of the Xbox and PC ecosystem.

Now, by cutting cloud access for these games adrift, with Ubisoft taking up publishing duties, Microsoft is – at least on paper – in the clear. It’s a situation akin to the kind of publishing deals that US and European publishers strike with Chinese publishers such as Tencent in order for their games to appear in China. ie: It’s a workaround… But it works.

So what do we know so far? Well, the new deal proposal has triggered a new regulatory ‘phase 1 investigation’ in the UK with a deadline set for October 18th, though if all goes well Microsoft could seal the deal and make this whole $68.7 billion dollar deal a reality before then.

Microsoft has done what?

“To address the concerns about the impact of the proposed acquisition on cloud game streaming raised by the UK Competition and Markets Authority, we are restructuring the transaction to acquire a narrower set of rights,” says Microsoft president Brad Smith. “This includes executing an agreement effective at the closing of our merger that transfers the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment SA, a leading global game publisher. The rights will be in perpetuity.”

What does this mean? Well, it means that – much to the CMA’s delight – Microsoft will never be able to release Activision Blizzard games exclusively on Xbox Cloud Gaming. Plus they’ll have no power to control licencing of these games for use on rival cloud gaming services. Instead, Ubisoft will be pulling the strings and making the moves and paying Microsoft for the privilege. Of course.

Ubisoft’s take?

“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,” explains Smith. “It will also give Ubisoft the opportunity to offer Activision Blizzard’s games to cloud gaming services running non-Windows operating systems.”

And to prove the point, Ubisoft has already confirmed that Activision Blizzard games will become part of its Ubisoft Plus Multi Access cloud gaming subscription deal, a service that it delivers on Xbox, PlayStation, PC and Amazon Luna.

They’ve put out a statement here and even already taken to X (formerly Twitter) to announce the collaboration as a done deal.

And the CMA is onside too?

And CMA has already spoken on their side of the deal too. “As part of this new deal, Activision’s cloud streaming rights outside of the EEA 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.”

And just when you thought things had reached peak complexity, never lose sight of the fact that this new deal is only in the UK. For now, at least… “The agreement with Ubisoft has been structured so that Microsoft will still acquire the rights needed to honour fully its legal obligations under its commitments to the European Commission, as well as its existing contractual obligations to other cloud game streaming providers, including Nvidia, Boosteroid, Ubitus, and Nware,” says Smith. ie: All the workarounds they’ve done to get the deal passed in Europe will still apply.

But the CMA is pretty clear that the deal is not out of the woods yet. Although that October 18th deadline – a relatively short amount of time in the contract world – does imply that they’re dotting ‘i’s and crossing ‘t’s at this point. “This is not a green light,” the CMA stressed. “We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments,” said Sarah Cardell, chief executive of the CMA. “Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

The CEO speaks

Activision Blizzard has officially shared a message from their CEO Bobby Kottick, which was sent to employees. The message sheds a little light on the plan and their aspirations for the deal which involves cloud gaming rights of crucial titles being passed to rival Ubisoft:

Team,

I want to share an update on our merger with Microsoft.

To address the UK CMA’s concerns regarding cloud streaming, Microsoft announced it filed a new merger application in the UK that includes a divestiture for cloud streaming rights at closing with respect to current and new PC and console games. We welcome Microsoft’s decision to enter into this agreement and submit a new application to the CMA, which Microsoft believes will address the CMA’s concerns.

For us, nothing substantially changes with the addition of this divestiture: our merger agreement with Microsoft, closing deadline, and the cash consideration to be paid for each Activision Blizzard share at closing remain the same. We will continue to work closely with Microsoft and the CMA throughout the remaining review process, and we are committed to help Microsoft clear any final hurdles as quickly as possible.

On that note, our integration management team is hard at work to ensure we are prepared for a smooth close. It’s a major, cross-functional, collaborative effort, and I am thankful for all the work that’s being done.

This has been a longer journey than expected, and I am very proud of how focused everyone has remained on delivering great games. Thanks for your continued dedication and commitment to our players.

More to come.

Bobby

Bobby Kottick

This article was first published on PocketGamer.biz.