Report: Microsoft Considering Selling UK Cloud Gaming Rights to Allow Activision Deal to Close - News
by William D'Angelo , posted on 03 August 2023 / 5,468 Views
Microsoft and Activision Blizzard are considering giving up some control over cloud-gaming in the UK to appease the the UK regulator, the Competition and Markets Authority (CMA), according to people familiar with the matter who spoke with Bloomberg.
It is reported Microsoft might be willing to sell its cloud gaming rights in the UK to a telecommunications, gaming or internet-based computing company. One person said a private equity company might be interested.
The sources said Microsoft and Activision Blizzard think it is possible to close the deal before the July 18 deadline.
The Competition and Markets Authority (CMA) in the UK in April blocked Microsoft's Activision Blizzard acquisition, however, Microsoft and Activision Blizzard has appealed the decision. The hearings for the appeal were set to start on July 24, however, the CMA and Microsoft have decided to pause litigation to work out a new deal.
CMA media officer Billy Proudlock yesterday said discussions with Microsoft and Activision Blizzard are "at an early stage" and the two companies are considering how the transaction could be modified.
The reason the CMA blocked the deal in April was due to concerns with cloud gaming. The CMA is concerned the "deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come."
The CMA states at the time "Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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Just as Michael Pachter predicted (that Microsoft would carve off whatever part of ABK's and/or Xbox's UK operations were necessary to close the deal). Whatever one thinks of his video game predictions, his mergers and acquisitions predictions seem to be on point.
Yep close enough, what's funny is we also discussed at length this possibility in the Xbox empire thread. The issue though, and contrary to what Pachter believed, is that even though CMA issue only pertained to the Cloud Market MS was not allowed to simply kill/spin their cloud initiative and close the deal. The CMA order was still effective as the final decision is independent of the SLC it is constituted of. So even though a drastic move like killing XCloud would resolve the SLC entirely the CMA still examine this as a remedy proposal and allow it which they were not doing since phase 2 was said and done.
Now that the CMA is feeling the heat they appear to be willing to engage in negotiation this is what enabled MS to take the track Pachter highlighted. So yeah he kinda got the result right not exactly the proceeding.
MS and the CMA never stop talking, the CMA were having none of MS proposal, it's them that changed their stance on this fueled by the fact the CAT appeal was already making them look bad and the fact they were now facing MS alone due to the probability of FTC success becoming trash.
Also looks like after all the CMA is not doing a new investigation over a new deal like it was rumored, they're extending the current one and MS will submit the change as a new remedy proposal: https://www.vgchartz.com/article/457837/uk-regulator-extends-deadline-for-final-decision-on-microsofts-activision-blizzard-deal/
So any way you cut it it's the CMA that changed their stance from lending a deaf ear to MS proposal to being open to remedy talk.
The article you linked specifically states "however, the CMA and Microsoft have decided to pause litigation to work out a new deal." . This is a new deal and the CMA is evaluating it the same way they evaluated the previous deal. The extension is because they need more time to look over the new deal as your article specifically says.
There are no new remedies. The CMA already stated on their twitter two days ago that the original deal is blocked and no new remedies can be submitted. This is how their procedures work. MS has to submit a new deal and as your article clearly says they are looking over that now.
Also this conveniently works out for the CMA who wanted this trial pushed back until October.
If that were the case they would start anew with a full new investigation. the word 'deal' here is simply used loosely meaning they are negotiating for a resolution.
A true new deal would require an updated version of the legal contract between MS and ABK which shareholders would need to vote on, this is not happening as far as we know. So everything MS 'deals' with the CMA will result in a remedy proposal on the current phase 2 investigation.
Your whole theory is based on assumptions. You linked an article and it says it's a new deal. The CMA reiterated yesterday that the current deal is blocked and a new one can be submitted by MSABK. They specifically said no new remedies can be submitted. I'm going to go with the articles and the CMA on this.
Even this article says they are trying to see how this transaction can be modified to get it through. If the transaction is modified then it's a new deal.
And yet MS isn't making a new deal, is it? And the CMA is not doing a new investigation, is it? those are not assumptions. And even if it was to be the case it does not matter. The CMA's first order prevented MS to try a new deal with ABK for the next 10 years. This means that even if this result in a brand new one it is still the CMA that changed its stance and allowed it.
So, like I said before, in any way you cut it it's the CMA that changed their stance from lending a deaf ear to MS proposal to being open to remedy talk. No matter how fancy they try to portray the situation to save face.
The way the CMA and FTC are working, they are treating Xbox like they are the market leader.
If Xbox were independent, I'm sure most of these issues wouldn't have been raised. They unfortunately happen to be owned by the 3rd biggest company in the world.
Its not the current global position they're looking at, its the position in the respective countries of the combined entity, and not just consoles but also the game development,publishing etc - and for cloud gaming, it is the market leader.
The deal looks like its gonna close relatively soon, barring the FTC appeal (not sure what the timeframe for that is). MS/ABK want to get it done so to them this small divestment would seem to be preferable to a potentially protected legal battle.
Losing Cloud in the UK is a small price to pay to gain ABK games and still be able to put those ABK games onto Gamepass and the Cloud in the other 85 countries where Xbox offers either PC, Console, or Cloud gaming officially. Smart move by Xbox, a small sacrifice for a massive gain.
I don’t think they are selling off cloud gaming in the UK, they are likely partnering with another company to provide cloud gaming on Microsoft’s behalf. So another company will handle the Xbox cloud infrastructure, and Microsoft will pay them to host it? That’s how I think it will work.
I dug deeper into this; to my understanding, Microsoft will sell the rights of Xbox Cloud to another company, meaning that Microsoft cannot release games on their Xbox Cloud service unless they have permission from this other company to do so. This other company will say things to Microsoft like “if you want to release Call of Duty on Xbox Cloud, we will not allow you to do it unless you also release on other competing services as well”. This other company will force Microsoft to release cloud games on competing platforms so CMA won’t need to do this themselves.
This is all early stage talk. Anyone thinking this is what's going to happen is speaking up way to soon. This might not even be acceptable to the CMA.
That would be such a terrible deal for UK consumers. Just represent an additional potential cost to gamers, rather than having it lumped in with Game Pass.
Yes, they can choose one of the other. But if they want both, they're going to be paying a lot more than they would if Microsoft held on to the business.
That said, I bet Microsoft buys the business back in a few years. If it's sold to a private equity firm, you can be confident that Microsoft will get it back once attention is no longer being paid to the matter. I'd bet five years or so.
