A hot potato: Microsoft desperately wants to close this multibillion-dollar deal with Activision Blizzard King (Activision for short). Not only has the acquisition gone past the point that it was supposed to be completed, but it has also brought heavy scrutiny from regulators who threaten to shut it down unless Microsoft spins off part of its business. It has prompted many promises from execs in Redmond, the latest of which is to offer a 10-year deal to Sony over Call of Duty.
Practically since the announcement of Microsoft’s $69 billion deal to pick up Activision, Sony has protested to regulators against the acquisition. It has consistently framed its argument using the company’s biggest-selling franchise, Call of Duty, to paint a picture where nobody but Microsoft will ever see another CoD game if the deal goes through.
Microsoft has continually denied that it would sequester the successful game series within the Xbox walled garden. It continues to affirm that it fully intends to honor all agreements made before the acquisition was made public. However, Sony continues to press the issue, and regulators are ramping up investigations into the deal.
In the latest development, Microsoft has said that it offered Sony a 10-year iron-clad contract earlier this month to continue releasing CoD games for the PlayStation. While Sony has not commented on the claim, Microsoft President Brad Smith told The New York Times it has a lot riding on the merger. If it falls through, it will leave a big question mark on whether corporations can mutually benefit from acquisitions in years to come.
Here is a quick list of concessions Microsoft has agreed to if regulators allow it to purchase Activision:
- Honoring past development agreements Activision has made
- Offering to keep CoD on PlayStation for three years beyond those agreements
- Remaining neutral in union negotiations at Activision and Blizzard
- Paying Activision $3 billion if the acquisition fails
- Guaranteeing to continue producing CoD games on PlayStation for at least 10 years
“If this deal had happened four years ago, this would hardly be of any interest,” said Smith. “If one cannot do something easy, then we’ll all know you can’t do something hard.”
Microsoft needs to convince regulators in 16 nations that the acquisition is good for the consumer. So far, only Brazil and Saudi Arabia have given the green light. Serbia is also likely to give its approval soon. However, other nations, particularly the US, UK, and EU, have done nothing but increase their scrutiny over the deal.
Smith feels the Activision deal is essential to continued growth. Microsoft’s gaming division has become a significant portion of its revenue stream, with Xbox making more than $15 billion annually. The Redmond tech giant is so vested in the pick-up that it promised Activision $3 billion even if the merger falls apart.
Microsoft’s official position on how the deal affects consumers is that it opens the door for even more players to play games regardless of their favored platform. Of course, this glosses over the fact that it refers to gaming via the cloud with a Game Pass subscription, which is definitely in Microsoft’s best interest.