Microsoft’s Activision Blizzard acquisition: What’s the latest?

22 September 2023


Microsoft Activision Blizzard acquisition graphic
(ESI Illustration) Logo credit: Activision Blizzard / Microsoft

Tech giant Microsoft made headlines in early 2022 by announcing its intention to buy Activision Blizzard, one of the world’s most-valuable gaming companies, for $68.7bn (~£50.5bn). The news took the world by storm, and was quickly labelled one of the most influential deals in the history of gaming.

Yet it’s late 2023, and the merger has yet to reach the finish line due to a number of legal hurdles, lawsuits and inquiries from governments all around the world. 

As of September 20223, the merger looks more likely to succeed, though no one truly knows when. The original deadline for the merger to complete was July 18th, however this was subsequently extended to October 18th. We’ve compiled a recap to keep you abreast of the Microsoft Activision Blizzard deal’s trials and tribulations.

ESI London 2023

Why are countries investigating the merger?

Due to the scale of the deal, regulators around the world fear that this acquisition may hurt competition and give Microsoft — which already owns Xbox — too much power in the gaming market.

Fears have centred around the potential effect on market share in the console gaming market. Microsoft could, regulators argue, make Activision Blizzard’s games (including the ultra-successful Call of Duty franchise) exclusive to its consoles, thereby hurting competition with rivals Sony and Nintendo. Other concerns have been around the potential impact on market share in the growing cloud gaming market.

Even though the two companies are both US-based, if the deal is not approved in other countries, the newly-merged entity would risk not being able to conduct business in those countries.

It is worth noting that the acquisition of Activision Blizzard is not the first big-money spending spree on gaming for the tech conglomerate, which already owns Xbox. Microsoft owns Minecraft, Halo developer 343 Industries, Obsidian Entertainment, Forza developer Playground Games, and Bethesda owner ZeniMax. Activision Blizzard would, however, be Microsoft’s largest purchase.

Where has the merger been approved? 

The Microsoft Activision Blizzard merger has already been approved in several markets around the world. These include the European Union, Ukraine, Saudi Arabia, Brazil, Serbia, Chile, Japan, South Africa, South Korea, New Zealand and China.

The first countries to accept the merger were Serbia, Brazil, Saudi Arabia and Chile in 2022, with other countries approving it in spring 2023 and beyond.

Which countries have rejected the merger?

As of right now, the merger is currently pending in the United States. In December 2022, the Federal Trade Commission (FTC) sued to block the deal. Then on June 12th, 2023, the FTC filed another lawsuit, this time seeking a temporary restraining order to stop the merger going ahead while its wider lawsuit continues, following reports Microsoft and Activision Blizzard were planning on consummating the deal despite remaining regulatory hurdles, the New York Times reported.

On July 11, 2023, the District Court in the Northern District of California rejected the FTC’s restraining order preventing the deal from closing, after five days of testimony. The judge ruled that the FTC had not proven the likelihood it would prevail on its claim that the merger would substantially lessen competition. The FTC appealed the decision on July 13th, but the appeal was denied.

While the FTC lost its case for a restraining order, the FTC still had its separate December 2022 lawsuit pending. However, BNN Bloomberg reported in July that the FTC has paused this lawsuit, clearing the way for talks between the FTC and Microsoft.

Meanwhile, in the UK, the Competition and Markets Authority (CMA) blocked the deal in April 2023. In a surprise decision, the CMA said it would not allow the deal to go ahead primarily because of the consequences it would have on the cloud gaming market. Microsoft and Activision Blizzard then appealed. In August, the CMA technically formally rejected the original deal, however allowed Microsoft to submit a restructured deal for review, which is now being considered by the CMA. In September 2023, the CMA indicated it would approve the new deal, setting the stage for the merger to go ahead.

Australia is still reviewing the merger.

Why would Microsoft buy Activision Blizzard?

When the news of the acquisition first broke, in January 2022, Reuters ran the headline ‘Microsoft to gobble up Activision in a $69 billion metaverse bet‘. This was at the height of the metaverse trend and would be the largest gaming industry deal in history. Microsoft is said to have wanted to acquire Activision Blizzard to further improve its presence in the gaming industry, and the metaverse, and to consolidate itself as the de facto king of cloud gaming. 

With Activision’s titles under its umbrella and with Xbox and its Game Pass and XboX Live platforms to support it, few companies could challenge Microsoft in the gaming field. Acquiring Activision Blizzard gives Microsoft access to multi-million dollar IPs such as Call of Duty, Overwatch, Diablo, and WarCraft franchises, as well as studios such as Treyarch and Infinity Ward, at a time when video game IP is proving highly valuable — just see the success of HBO’s The Last of Us adaptation.

The company would also become a major stakeholder in esports, and get access to major esports properties like Call of Duty, Overwatch and Major League Gaming.

Couple all this with Activision Blizzard’s internal problems and affairs, and the fact that its CEO Bobby Kotick was investigated by the SEC, and one can see what makes the deal appealing to both sides. Microsoft’s offer came during the height of legal and public backlash over lawsuits alleging widespread sexual harassment problems at the publisher — and while it’s hard to think of $69bn as a discount, its legal and PR problems may have given Microsoft a better deal.

Activision Blizzard headquarters
Activision Blizzard headquarters in Santa Monica, California. Image via: Wikimedia Commons

Timeline of the deal’s troubles

Unfortunately for Microsoft, the scope of the deal and its effect on the gaming industry caught the eyes of many regulators, governments, competitors, and agencies worldwide. One of the first critics of the move was Sony, its largest competitor in the field of gaming consoles and a staunch opponent of the acquisition. Sony wanted to be sure that Microsoft will keep all of its newly-acquired IPs on PlayStation, a direct competitor to Xbox, so is naturally against the deal.

It was at the beginning of February that the United States Federal Trade Commission started investigating the deal. Considering the scope, it was apparent that this will not be another swift deal for Microsoft, a fact that was proven multiple times afterward. The FTC formally announced a lawsuit on December 8, 2022, putting the deal under much more pressure.

The next big blow to the merger was made by the CMA, the UK’s regulator, when it provisionally opposed the deal in January 2023. Many expected the CMA to allow the merger after it released a statement in March saying one of its three key concerns had been addressed by new evidence. However, in April 2023, the government body prevented the proposed purchase over concerns about the “future of the cloud gaming market”. Microsoft did present a solution to the CMA, which was deemed not adequate and thus rejected. As a result, both Microsoft and Activision Blizzard appealed the decision.

Attention shifted to the US on July 11th with an important win for Microsoft and Activision Blizzard when a court denied the FTC’s request for a restraining order it had filed to prevent the deal from passing. This effectively meant the two parties could go ahead with the merger in the US if they wanted to, though they couldn’t operate in the UK if they did so.

On July 19th, Microsoft and Activision Blizzard announced they had extended the original July 18th deadline until October 18th, to give them more time to reach an agreement with the UK’s CMA.

On August 22, Activision Blizzard and Microsoft proposed a new deal to the CMA, after the agency confirmed that it will indeed block the original deal. In a blog post, Microsoft stated that the new deal “presents a substantially different transaction under UK law than the transaction submitted to the CMA in 2022.” Microsoft said that it had notified the CMA of the restructured transaction and that it expects the CMA’s review process to be completed before October 18th, the new deadline for the merger following Microsoft and Activision Blizzard’s 90 day extension.

The new deal notably included a major agreement to transfer streaming rights of Activision Blizzard games on PC and console to Ubisoft, another game developer and publisher, for 15 years. This potential deal will allow Ubisoft to offer Activision Blizzard’s games on cloud services that are not running Windows. The CMA said it would consider this deal and approach it as if it was a completely new.

However, the change in the underlying deal may mean the EU has to reconsider its own stance. Per media reports, an EU spokesperson said: “The commission is carefully assessing whether the developments in the UK require another notification to the commission.” The EU gave its blessing to the original deal in May, so it may have to reinvestigate this new deal submitted to the CMA if it is substantially different.

Nonetheless, on September 22nd, 2023, the CMA said Microsoft’s new deal “opens the door” to the deal going ahead, setting the stage for the merger to finally successfully pass.

Competition and Markets Authority (CMA) UK regulator
The deal’s fate now rests largely on the CMA. Image credit: Competition and Markets Authority (CMA)

What would the acquisition mean for esports?

The acquisition would set Microsoft up as a key player in esports at a difficult time for the industry. Its involvement may offer a mark of legitimacy as esports goes through a downturn in investor confidence and many companies are struggling financially.

Importantly, Activision Blizzard’s Overwatch League and Call of Duty League are floundering. Activision Blizzard quietly stated in May 2023 that its leagues “continue to face headwinds which are negatively impacting the operations and, potentially, the longevity of the leagues under the current business model.” In July 2023, Activision Blizzard disclosed that franchises will vote on the future of the league, offering them $6m (~£4.66m) if they want out.

It comes after franchise owners reportedly started collective bargaining against the company in January 2023 due to high costs and missed promises on revenue. Many sponsors also left the leagues following Activision Blizzard’s sexual harassment lawsuits.

In light of that, big-money and big-name support from Microsoft could help turn around their fortunes. On the other hand, its potential new owner might not be as invested in Activision Blizzard’s grand franchising experiments, and make decisions based on their current financial footing — which could potentially see a downsizing, or even cancellation, of the leagues.

What will happen next?

The pressure applied by regulators has successfully drawn concessions from Microsoft, most notably assurances that Activision Blizzard will ensure access to its games to rivals. The deal needs to be finalised before the October 18th deadline, unless that deadline is extended again by Microsoft and Activision Blizzard.

Following the CMA’s decision to essentially let the acquisition proceed, Alex Haffner, a competition partner at London law firm Fladgate, said in a statement sent to Esports Insider: “Assuming that is the end result, both sides will (publicly at least) feel that they have achieved the desired outcome: Microsoft by removing the last major impediment to completing this important deal and the CMA in securing sufficient concessions from the parties to demonstrate that its concerns about any negative impact on competition and consumers have been met.

“Nonetheless, once the dust settles on what has been a tumultuous investigatory process there will be important lessons to be learned by all concerned and the ongoing spotlight on the way that competition regulators such as the CMA deal with “Big Tech” will continue to attract significant attention.”

“Microsoft had already set out, in the terms of a “new deal” put before the regulator that it was willing to sell important rights to sell cloud gaming versions of Activision gaming titles to Ubisoft. In its announcement today, the CMA has effectively endorsed that concession as being sufficient to mitigate the competition concerns which the CMA had previously raised as being an insurmountable barrier to the transaction getting UK regulatory clearance (under the terms of the original deal put forward by the merging parties).”

According to reports, as well as documents revealed and leaked during the acquisition effort, Microsoft is highly committed to Activision Blizzard, which it sees as integral to shoring up its stake in gaming as the industry grows ever more important.

Ivan Šimić
Ivan comes from Croatia, loves weird simulator games, and is terrible at playing anything else. Spent 5 years writing about tech and esports in Croatia, and is now doing it here.

Editor’s note: This article is being kept up to date as the situation develops. The publish date indicates when the article was last updated. Article first published 02/06/2023.