This approval "represents a significant improvement for cloud gaming."
Art showing the potential acquisition of Activision Blizzard by Microsoft including various IPs owned by Activision Blizzard.

Hot on the heels of the UK's Competition and Markets Authority (CMA) blocking the merger between Microsoft and Activision Blizzard comes the approval of the merger from the European Commission (EC). This approval brings Microsoft's $70 billion acquisition of Activision Blizzard that much closer to being completed.

Interestingly, the European Commission had very similar conclusions and concerns as the CMA but the overall conclusion was vastly different between the two regulatory authorities. They both feel as though the merger would not cause any harm to the console market but could potentially harm cloud gaming.

Unlike the CMA, the EC says that they are satisfied with Microsoft's deals and changes that would address any and all of those concerns raised by the EC. As you recall, the CMA denied approval of the merger largely due to how they believed it would harm cloud gaming.

A look at the proposed remedies offered were outlined in the EC's statement.

The proposed remedies

To address the competition concerns identified by the Commission in the market for the distribution of PC and console games via cloud game streaming services, Microsoft offered the following comprehensive licensing commitments, with a 10-year duration:
  • A free license to consumers in the EEA that would allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license.
  • A corresponding free license to cloud game streaming service providers to allow EEA-based gamers to stream any Activision Blizzard's PC and console games.
Today, Activision Blizzard does not license its games to cloud game streaming services, nor does it stream the games itself. These licenses will ensure that gamers that have purchased one or more Activision games on a PC or console store, or that have subscribed to a multi-game subscription service that includes Activision games, have the right to stream those games with any cloud game streaming service of their choice and play them on any device using any operating system. The remedies also ensure that Activision's games available for streaming will have the same quality and content as games available for traditional download.

These commitments fully address the competition concerns identified by the Commission and represent a significant improvement for cloud game streaming compared to the current situation. They will empower millions of EEA consumers to stream Activision's games using any cloud gaming services operating in the EEA, provided they are purchased in an online store or included in an active multi-game subscription in the EEA. In addition, the availability of Activision's popular games for streaming via all cloud game streaming services will boost the development of this dynamic technology in the EEA. Ultimately, the commitments will unlock significant benefits for competition and consumers, by bringing Activision's games to new platforms, including smaller EU players, and to more devices than before.

The Commission carefully investigated the effectiveness of the remedies, collecting views from a large number of market participants and stakeholders. In particular, cloud game streaming service providers gave positive feedback and showed interest in the licenses. Some of these providers have already entered into bilateral agreements with Microsoft based on the proposed licenses to stream Activision's games, once the transaction is completed.

Taking into consideration the feedback of the market, the Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns and would ultimately unlock significant benefits for competition and consumers.‚Äč
It seems as though the proposed remedies offered by Microsoft ensures that everyone within the European Economic Area (EEA) (not you, United Kingdom) will get free access to a cloud streaming version of past and future Activision Blizzard games that they purchase(d). It also says that these Activision Blizzard games will be offered to other cloud streaming services and won't be tied to Microsoft's own cloud gaming service. The proposed remedies would be in place for at least ten years.

These two proposed remedies would mean that consumers in the EEA would not need to subscribe to Game Pass Ultimate or the Xbox Cloud Gaming platforms. That is honestly not too bad at all. It sure feels like a win-win for all parties involved if that is the extent of the remedies Microsoft had to offer.

Microsoft's remedies also echo what they have been saying for a while now, that they want to make games more accessible and offer them to as many players as possible.

As far as hindering rival console makers, such as Sony, the EC says that Microsoft "would not be able to harm rival consoles and rival multi-game subscription services." The EC says it believes Microsoft has no incentive to refuse to distribute Activision Blizzard games to Sony as Sony is the "leading distributor of console games worldwide."

The EC continues to say that even if Microsoft were to make franchises like Call of Duty exclusive to Xbox, Sony would still be able to easily compete against Microsoft.

Even if Microsoft did decide to withdraw Activision's games from the PlayStation, this would not significantly harm competition in the consoles market. Even if Call of Duty is largely played on console, it is less popular in the EEA than in other regions of the world, and is less popular in the EEA within its genre compared to other markets. Therefore, even without being able to offer this specific game, Sony could leverage its size, extensive games catalogue and market position to fend off any attempt to weaken its competitive position.
Remember, they say this purely from the point of view of the EEA, not for other global markets. Call of Duty just isn't as popular in the EEA as it is elsewhere, like in the United States.

Speaking of the United States, this merger is still up in the air with the US's Federal Trade Commission (FTC). The last we really heard from the FTC about this merger came in December 2022 when the FTC decided to sue to stop Microsoft from acquiring Activision Blizzard. The FTC will hold their hearing about the merger in August 2023.

Microsoft is also not quite done with the UK's CMA just yet either. Microsoft will appeal the CMA's decision, a process that may take several months in and of itself. The CMA has won over 2/3rds of all merger appeals, a sign that does not bode well for Microsoft. It also raises the question then: If all authorities around the world except for the CMA approve the acquisition, what will Microsoft do? Either they stop all operations within the United Kingdom or they abandon the acquisition entirely for all markets.