The UK's Competition and Markets Authority (CMA) has indicated that the sale of Activision Blizzard, Inc.'s (Nasdaq: ATVI) cloud gaming rights to Ubisoft Entertainment SA has substantially addressed previous concerns, potentially paving the way for the Microsoft/Activision deal clearance. Although the CMA has identified some residual concerns, Microsoft Corporation (Nasdaq: MSFT) has proposed remedies that the CMA provisionally believes should resolve these issues.

This development follows the CMA's decision to block Microsoft's acquisition of the entirety of Activision earlier this year, citing concerns about potential harm to competition in the UK's cloud gaming market. Subsequently, Microsoft presented a restructured transaction for CMA review in August.

Under the revised deal, Microsoft will not acquire Activision's cloud gaming rights; instead, these rights will be sold to independent third party Ubisoft. This move positions Ubisoft as a critical content supplier for cloud gaming services, akin to the role Activision would have played as an independent entity.

In contrast to the original deal, Microsoft will no longer control cloud gaming rights for Activision's content, eliminating concerns about limiting access to its own cloud gaming service or withholding games from competitors. Unlike previously rejected remedies, Ubisoft will have the freedom to offer Activision's games directly to consumers and all cloud gaming service providers in various models, including buy-to-play, multigame subscription services, or new emerging content delivery methods. The deal also mandates Microsoft to port Activision games to operating systems beyond Windows and support game emulators upon request, addressing previous shortcomings.

The CMA views the restructured deal as a significant improvement that addresses earlier concerns. The sale of Activision's cloud streaming rights to Ubisoft ensures that essential content, including popular titles like Call of Duty, Overwatch, and World of Warcraft, remains independent from Microsoft's control in the cloud gaming space. The CMA initially found that Microsoft already had a dominant position in cloud gaming services and could have exploited its influence over Activision content to stifle competition. The new deal transfers cloud streaming rights for Activision's games to Ubisoft, promoting continued open competition in the evolving cloud gaming market.

While the restructured deal addresses most concerns, the CMA retains limited residual concerns about potential circumvention, termination, or non-enforcement of certain provisions in the sale of Activision's cloud streaming rights to Ubisoft. To alleviate these concerns, Microsoft has proposed remedies to ensure that the terms of the sale are enforceable by the CMA. The CMA has provisionally concluded that these additional protections should resolve the remaining concerns.

The CMA has initiated a consultation process, running until October 6, to gather feedback on Microsoft's proposed remedies.

In pre-market, $MSFT was trading at $320.50, up $0.97 (+0.30%), while $ATVI was trading at $94.05, reflecting an increase of $1.70 (+1.84%).

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