When it was first announced, the Microsoft Activision deal created ripples in the gaming industry. While rivals worried about the combined firepower, regulators stressed over anti-competitive behavior. The multi-billion-dollar deal was set to bring in new tomorrows and gave fans hope for better technical challenges.
But all that was not to be. Regulators rightly raised concerns about monopoly and had the tech giant re-evaluate its deal. The end result was a 10-year-deal between Microsoft and Nvidia.
Everyone knows that Xbox and PlayStation have fought for gamers’ attention and the old deal threatened to weaken the rivalry, leaving players vulnerable. The original deal could have stifled innovation and creativity, resulting in fewer choices and higher prices.
After the ticket master fiasco with Taylor Swift, it appears regulatory agencies are anxious to prevent a repeat performance.
So, what are the terms of the new deal? And why has Microsoft extended an olive branch to a rival?
The Microsoft Activision Deal Ropes in Nvidia
The $69-billion acquisition of Activision by Microsoft will be completed once the Xbox-makers allow Nvidia to access Activision games.
Microsoft President Brad Smith is now optimistic about inking the deal after signing the 10-year Nvidia licensing deal as well as a similar arrangement with Nintendo Co Ltd.
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Nvidia’s Vice President and GM of the Geforce segment Phil Eisler shared, “We were a little concerned about it at the beginning. But then we reached out to Microsoft, and they were very open about wanting to enable cloud gaming and work with us on a 10-year license agreement. So over time, they made us more and more comfortable with it.”
The announcement of a deal between Microsoft and Nvidia impacted stock of both companies negatively. Shares were down by nearly 2% on Tuesday for both firms. Nvidia clarified that it is supporting the Microsoft Activision deal. However, It could be tougher to convince regulators.
The deal as it stands now will allow paying customers to access Nvidia’s cloud gaming platform for a fee and for another fee they can get their hands on Microsoft’s games.
Regulatory Bodies Scrutinize Microsoft Activision Deal
The European Union’s regulators remain unconvinced and on February 21 both Microsoft and Sony’s gaming chiefs met with officials over the proposed acquisition.
The closed-door hearing in Brussels will decide the fate of the acquisition that has faced opposition from both the US and the UK. As per media reports, other than Sony and Nvidia, Google too had expressed concerns about the takeover. Sony has argued that the Microsoft Activision deal could hurt developers and lead to price rises. Negotiations have been intense and fraught with tension, despite Microsoft offering to let them keep “Call of Duty” on Sony’s consoles for many more years.
Microsoft, meanwhile, has repeatedly expressed that the deal will allow it to compete with the likes of Tencent and Sony, in the PC, mobile, and cloud gaming segments.
The EU is expected to make a decision based on concerns about cloud competition and game exclusivity.
In the UK, the regulatory body suggested selling off the “Call of Duty” part of the business to win over regulators. It is unlikely that the company will part with something so lucrative, with Call of Duty: Modern Warfare 2 being the biggest selling game of 2022 in the US. The franchise had sold over 400 million lifetime unit sales by 2021.
In the US, the Federal Trade Commission (FTC) urged a judge to block the deal in December 2022. A group of gamers also sued Microsoft citing an uneven playing field for other players as the deal will give the tech giant “the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”
Although Microsoft has indulged in seemingly anti-competitive behavior in the past, none were as big as the Activision deal, which allowed it to fly under the regulators’ radar. With the Microsoft Activision deal in process, competitors and other non-governmental bodies have taken an active interest in leveling the playing field for game developers.
The outcome of Microsoft’s EU defense will set the tone for approvals in other countries and determine the legacy of gamers.
