Microsoft's Activision deal reaches critical moment in Europe talks
Microsoft's (NASDAQ:MSFT) 13-month-old $69B proposal to acquire Activision Blizzard (NASDAQ:ATVI) may be reaching its critical moments in Europe, following Tuesday's closed-door hearing with European Union regulators over whether the deal presents too many anticompetitive concerns.
Deals Microsoft firmed up Tuesday with Nintendo (OTCPK:NTDOY) and Nvidia (NVDA) are set to bring Activision Blizzard's perennial blockbuster game Call of Duty to as many as 150M more people, Microsoft President Brad Smith noted after the hearing.
(He couldn't characterize exactly what was discussed behing closed doors, but advocated for his company's megadeal in a way targeted at key opponent Sony (NYSE:SONY), maker of the PlayStation console that is the key rival to Microsoft's Xbox.)
Notably, it's the UK's Competition and Markets Authority that may be on board with the most Sony-friendly option: carving out Call of Duty (usually the year's best-selling game) from the deal to allow it to proceed.
That's not likely to be among the remedies Microsoft (MSFT) will accept now that the EU's statement of objections is in place.
âWe donât think itâs feasible or realistic to think that one game or one slice of this company can be carved out and separated from the rest,â Smith told Bloomberg.
There's a "stark choice for the regulators of the world," Smith said at a news conference. "Itâs really a question of whether they want to block this deal, or approve it with a set of guardrails, remedies with conditions. And, as weâve said, since the earliest days of this deal, just as weâre comfortable, indeed, even eager to enter into private agreements that will have binding legal effect for a decade, weâre also more than prepared to address the questions that people may have with regulatory undertakings as well."
Sony (SONY) responded to the day's hearing by scheduling a new "State of Play" game reveal event for Thursday afternoon. That's expected to include highlights of new games coming to its platform - if not its own extra commentary on the Microsoft-Activision deal.
Another key front for objections to the deal - other parties weighing in include Google (GOOG) (GOOGL) - is Microsoft's power in the growing area of cloud subscription gaming. And Microsoft's deal with Nvidia also means that Microsoft will bring its Xbox games that play on PCs to Nvidia's GeForce Now cloud streaming service. Assuming the acquisition goes through, it will bring all of Activision Blizzard's titles to GeForce Now as well, Smith said.
"Now we're addressing the full range of issues that have been raised by regulators as topics of not just interest, but in some cases concern," Smith said.
He also cited support from the European Game Developer Federation (representing more than 2,000 small studios) and labor organization UNI, as well as Valve, which operates top PC game store Steam, while taking shots at Sony, the key rival to the transaction.
"Think about the market in Europe," Smith said. "Think about the market that the Federal Trade Commission defined and what it would mean here in Europe. It is a market in which Sony has an 80% share, Xbox has 20% share. Globally, itâs about 70/30. In Japan, itâs 96 to 4."
Sony has a choice to come to a deal as well, a move it's so far refused, Smith noted.
"I walk around with an envelope that contains the definitive agreement that we sent to Sony two days before Christmas," he said. "Iâm ready to sign it at any time. And if Sony doesnât like the words, weâre ready to sit down and pull out a pen, or a version of Microsoft Word, and its cut and paste features."
Microsoft and others have until Wednesday to respond to the provisional findings in the UK.