Microsoft will sell Activision Blizzard streaming rights to Ubisoft in attempt to win UK approval

Microsoft is significantly restructuring its Activision Blizzard merger proposal by selling cloud gaming rights for Activision Blizzard games to rival Ubisoft, it wrote in a blog post late yesterday. That would address a key concern of UK regulators, which blocked the deal in part become of Microsoft's potential dominance in cloud gaming — but nothing is likely to be approved until October 18th. 

"As a result of the agreement with Ubisoft, Microsoft believes its proposed acquisition of Activision Blizzard presents a substantially different transaction under UK law than the transaction Microsoft submitted for the CMA’s consideration in 2022," Microsoft President Brad Smith wrote. 

If the merger goes through, Microsoft would transfer "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," Smith added. That means Microsoft wouldn't be able to make Activision Blizzard games exclusive for Xbox Cloud Gaming, nor have any say on how they're released on rival services. It will also allow Ubisoft to offer Activision Blizzard cloud gaming services on Apple and other non-Windows systems. 

As for the terms of the transaction, "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," Smith said. 

In its own blog post, Ubisoft indicated that Activision Blizzard titles will be available across a range of services if the deal goes through. "With a single subscription to Ubisoft+ Multi Access, players will soon be able to play their favorite Ubisoft and Activision Blizzard games across multiple platforms including PC, Xbox consoles and Amazon Luna, and on the PlayStation platform through Ubisoft+ Classics," wrote Ubisoft's Daniel O'Connor.

The UK's CMA (Competition and Markets Authority) blocked the proposed merger earlier this year citing cloud gaming monopoly concerns as the primary issue. However, after the US Federal Trade Commission (FTC) lost its own appeal to block the merger, the CMA agreed to extend negotiations until August 29th. "Based upon the discussion to date, both sides — Microsoft and the CMA — have confidence that Microsoft notifying a restructured transaction is capable of addressing the concerns that the CMA has identified," the CMA said in July. 

The UK regulator will now examine the restructured deal and deliver a decision by October 18th, it said in an article published today. "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," said CMS chief executive Sarah Cardell. "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."