Microsoft (US:MSFT) has won its case against the US regulator that was attempting to block its $75bn (£58bn) deal for games developer Activision Blizzard (US:ATVI). A judge in a federal court in San Francisco refused the request from the Federal Trade Commission (FTC) for an injunction preventing the deal from closing.
Within an hour of the ruling, the UK’s Competition and Markets Authority said it had delayed its decision to block the deal and asked the companies to provide a new set of concessions to help ease its concerns. The combination of these event has revived investor confidence in a deal that seemed unlikely just a few weeks ago. Activision’s share price is up 10 per cent since the ruling.
The FTC’s concern was that Microsoft would eventually block Activision’s games from Sony's PlayStation console, favouring its own Xbox platform. However, in the ruling judge Jacqueline Scott Corley said that Microsoft had agreed to keep Activision’s most popular game, Call of Duty, on PlayStation for 10 years and had also signed an agreement making it available on Nintendo Switch.
Judge Corley added that this deal could increase the availability of the Call of Duty game: “Before the merger, a consumer wanting to play a Call of Duty console game had to buy a PlayStation or an Xbox. After the merger, consumers can utilize the cloud to play on the device of choice, including, it is intended, on the Nintendo Switch. Perhaps bad for Sony. But good for Call of Duty gamers and future gamers," she said.
For the deal to go through, it still needs to be approved by the UK regulator. The CMA was more worried about the nascent cloud gaming market rather than access to the Call of Duty franchise. To ease these worries it may ask Microsoft to sign long-term licensing agreements with competitors or divest parts of the Activision business. The deal could close next week if the CMA goes along with the US decision.
In the near-term, Jefferies analyst Andrew Uerkwitz says this deal would have “very little impact on the way gamers game”. However, in the longer term it will encourage further consolidation. If other big tech companies want to enter the space, they will have to do it through acquisitions and this judgement has opened the door for further deals. Games developers Take-Two Interactive (US:TTWO) and Electronic Arts (US:EA) both saw their share prices rise 5 per cent on the news.
