Microsoft to sell Activision rights to Ubisoft to appease UK regulator

Microsoft will have to licence content from Ubisoft under the proposed deal

Microsoft has submitted a restructured deal for its planned $69 billion acquisition of gaming company Activision Blizzard.

Under the new proposal, Microsoft will sell Activision's cloud streaming rights for current and future PC and console games over the next 15 years to its rival, France-based games publisher Ubisoft. The rights will apply globally outside the European Economic Area, where a similar concession was made earlier.

The UK Competition and Markets Authority (CMA) blocked the acquisition of Activision Blizzard in April, citing concerns about the possible negative impact on cloud gaming. Microsoft sought to challenge this decision, arguing circumstances had changed, but this week the regulator rejected its arguments and imposed a final order prohibiting the deal worldwide.

With the EU approving the deal in May, and with US regulator the FTC, which opposes the deal, effectively sidelined by an appeals court decision, the UK represents one of the final hurdles to the mega-deal.

By selling Activision's cloud streaming rights to Ubisoft Microsoft is hoping to alleviate the regulator's concerns that it could restrict Activision games to its Xbox Cloud Gaming service.

Instead, under the new proposals, Microsoft will have to obtain licences from Ubisoft for Activision content it wants to include in its own cloud gaming service.

Ubisoft will also be able to licence Activision's games under different business models, and will have the option to require Microsoft to adapt games for non-Windows operating systems.

"We believe that this development is positive for players, the progression of the cloud game streaming market, and for the growth of our industry," said Microsoft vice chair and president Brad Smith in a blog post.

Microsoft had made separate concessions to gain European Commission approval, guaranteeing access to Activision games on any cloud platform. Therefore the restructured deal only changes the position outside the European Economic Area.

Responding to the announcement, the CMA says it will launch a new investigation, during which it will field comments on how the restructured deal could affect competition. The deadline for a decision is 18th October.

While the move represents a significant shift, the CMA stresses that approval is not guaranteed.

"This is not a green light," said CMA chief executive Sarah Cardell.

"We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments. 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."

Having hoped to have sealed the deal in July, Microsoft does not now expect to close the Activision acquisition until October at the earliest.