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Microsoft sell cloud gaming rights to Ubisoft to dodge the UK's Activision Blizzard deal block

And the deal goes on… All parties are agreed on the new UK-specific arrangement with an October 18 deadline for final approval
Microsoft sell cloud gaming rights to Ubisoft to dodge the UK's Activision Blizzard deal block
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It’s obvious when you think about it, but it’s the turn of events that nobody genuinely saw coming. Why not just ‘gift’ the cloud gaming side of the deal to Ubisoft and plough ahead?…

Yes, 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 - as we’ve widely documented in the past - 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 it’s 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 are - 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. I.e. 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 have 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 have 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 are onside too?

And CMA have 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 honor 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. I.e. 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 18 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 stress. “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.”

We await further fallouts, twists and turns with interest.

Update: Activision Blizzard CEO Bobby Kottick has shared a message to employees concerning the new deal.