Amanda Meyer
Associate Editor
Loyola University Chicago School of Law, JD 2025
On January 18, 2022, Microsoft announced that it will be acquiring Activision Blizzard, one of the world’s largest gaming corporations. This will be Microsoft’s biggest acquisition in the company’s history. The acquisition is an all-cash purchase, with Microsoft paying $95 per Activision share, totaling to around $68.7 billion dollars. Microsoft and Activision had an original signing date to complete the merger agreement on July 18, 2023, but the companies pushed the date back to October 18 amid regulatory pushback. Although the merger is exciting news for many companies and individuals, other are less than enthused about the new development.
Background on Microsoft and Activision:
Microsoft was founded in 1975 and has become one of the largest companies in the world and the leading producer of technology and software. The company is responsible for producing Xbox, various computers and tablets, all the software in Microsoft Office, and many more common household and work products. Microsoft’s annual revenue for 2023 was $211.915 billion dollars as of June.
Activision was founded in 1979 and has grown to be one of the largest gaming platforms in the world. It is now known as “one of the world’s most successful standalone interactive entertainment and gaming corporations,” and is a member of the Fortune 500 and S&P 500. Some well-known games created by Activision Blizzard are Candy Crush, World of Warcraft, Call of Duty, and Overwatch. Activision’s games have around 92 million monthly active users.
What is included in the deal
Some major provisions that were agreed upon in the merger agreement are:
- Royalty free licenses to cloud gaming platforms to stream Activision games, if a consumer has purchased them
- Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision for the next 15 years. Instead, the deal will give Ubisoft, a French game developer access to the cloud rights for the next 15 years.
- Finally, the merger agreement contains a provision that increases the termination fee by increments at certain periods if the merger has not been signed on the agreed-upon date.
FTC’s failed injunction
Regulators are concerned that Microsoft will restrict access to Activision’s games and make them exclusive to Xbox and other Microsoft products. The FTC brought a lawsuit against Microsoft and Activision in December of 2022 in order to thwart the merger due to there being concerns about Microsoft being able to harm competition after acquiring Activision. If the merger is finalized, then Microsoft’s Xbox would be able to have exclusive access to Activision games, which isolates competitors like Nintendo and PlayStation. They then filed another lawsuit on June 12th, 2023 seeking a restraining order in order to stop the merger deal from moving forward during the original lawsuit. However, this attempt failed after the District Court in the Northern District of California ruled in favor of Microsoft and Activision Blizzard, saying that the FTC did not present enough evidence to prove that the deal would substantially lessen competition. This means that the merger currently has no remaining regulatory barriers in the United States. Regulators in the E.U. approved the merger in May after Microsoft offered an updated merger agreement.
The United Kingdom is the final regulatory hurdle before the merger agreement can be enacted between Microsoft and Activision. The Competition and Markets Authority (CMA) blocked the merger deal in April 2023, saying that there may be potential consequences with the “cloud gaming” market if the merger continues. Cloud gaming is a growing area of technology that allows people to stream games on phones, tablets and other devices. Although the original deal has been blocked, the CMA allowed Microsoft to submit a restructured deal, which includes giving Ubisoft, a French gaming developer, control over licensing deals for cloud gaming services for 15 years. This restructured deal is currently being reviewed by the CMA.
Moving forward:
The merger itself can be a great catalyst for new gaming technology and ideas, and can pave the way for other gaming and software companies to step up in the competition. If the Microsoft and Activision follow through on the merger agreement, then Microsoft becomes the surviving corporation, eliminating Activision and its stock. The two companies will go forward together as Microsoft. If the merger fails, then Microsoft will have to pay a breakup fee, and the two companies will continue as separate entities as if nothing had happened. If Microsoft can honor its promises in the revised deals it has given regulatory agencies, then this merger can be a fantastic opportunity for new and improved games from Microsoft and its competitors.