The EU approves Microsoft's $68.7 billion Activision Blizzard takeover

Microsoft has overcome a significant hurdle in its attempt to buy Activision Blizzard for $68.7 billion. As expected, the European Union has rubberstamped the acquisition. The European Commission (the EU's executive arm) said Microsoft will have to ensure full compliance with the commitments it has made to offer its games on other platforms, particularly cloud gaming services.

Activision does not yet offer its titles on cloud gaming services. EC regulators determined that the game streaming market is relatively small as things stand and having Activision games available on cloud platforms could help it to grow. Were Microsoft to offer Activision games exclusively on its own cloud service, that could have impaired competition, the EU said.

Microsoft has signed 10-year deals with Nintendo and cloud gaming services such as NVIDIA GeForce Now and Boosteroid to make its own games and Activision's available on them. As such, regulators said Microsoft's commitments "fully address the competition concerns identified by the Commission and represent a significant improvement for cloud gaming as compared to the current situation."

"Video games attract billions of users all over the world. In such a fast-growing and dynamic industry, it is crucial to protect competition and innovation. Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before thanks to cloud game streaming," the EC's competition chief Margrethe Vestager said. "The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth."

"The EC conducted an extremely thorough, deliberate process to gain a comprehensive understanding of gaming. As a result, they approved our merger with Microsoft, although they required stringent remedies to ensure robust competition in our rapidly growing industry," Activision CEO Bobby Kotick said in a statement. "We intend to meaningfully expand our investment and workforce throughout the EU, and we’re excited for the benefits our transaction brings to players in Europe and around the world."

The UK's Competition and Markets Authority (CMA) blocked the Activision acquisition last month over concerns that it would give Microsoft too much of a dominant position in the cloud gaming market, though it does not believe the takeover would pose a threat to competition in the console ecosystem. Microsoft is appealing the CMA's decision. That process is likely to take months to resolve.

In response to the EU's decision, the CMA stood by its claim that Microsoft would still have too much power in the cloud gaming space. "Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next 10 years," the CMA wrote on Twitter. "They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them and the conditions of sale."

On the console side of the equation, the EU has determined that "Microsoft would have no incentive to refuse to distribute Activision's games to Sony." It noted that Sony is the world's biggest distributor of console games and that in the European Economic Area (EEA), there are four PlayStations for every Xbox sold. The EC suggests that would give Microsoft "strong incentives" to keep offering Activision games on PlayStation.

Even so, were Microsoft to pull Activision titles from Sony platforms, "this would not significantly harm competition in the consoles market," according to the EU. "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," the bloc said. "Therefore, even without being able to offer this specific game, Sony could leverage its size, extensive games catalog and market position to fend off any attempt to weaken its competitive position."

Much of the discourse related to the acquisition has centered on Call of Duty and how eager Sony was to stop Microsoft from making that series exclusive to its platforms (something Microsoft says doesn't make sense for it to do). Call of Duty games are said to contribute hundreds of millions of dollars to Sony's bottom line every year, but cloud gaming has been the bigger sticking point for UK and EU regulators.

In December, the US Federal Trade Commission sued to block the deal over concerns it "would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business." A hearing in that case is scheduled for August 2nd. Although Microsoft and Activision Blizzard face a tough battle to push the deal through in the UK and the US, the EU approval gives the companies some more momentum.