Gaming

Why Microsoft had to relinquish Activision’s cloud-gaming rights outside Europe

Comment

Concept illustration depicting cloud gaming
Image Credits: Blablo101 / Getty Images

Microsoft has finally done it — nearly two years after the Xbox-maker first revealed plans to acquire gaming giant Activision Blizzard in a mammoth $68.7 billion deal, it has managed to secure U.K. regulatory clearance, meaning that Activision will now be a fully fledged subsidiary.

But the antitrust clearance comes with one notable caveat.

For the next 15 years, Microsoft is relinquishing cloud-streaming rights for all Activision games outside the European Economic Area (EEA), a region that constitutes the 27 European Union (EU) members plus Iceland, Liechtenstein and Norway. This means that French game publisher Ubisoft is also a big winner, as it will have exclusive global streaming rights outside the EEA, while inside the EEA it will share streaming rights with rivals, including Microsoft/Activision.

There is no escaping the fact that Microsoft has had to give U.K. regulators a sizeable concession to rubberstamp its Activision acquisition, one that impacts current and future Activision titles that Microsoft wants to make available through the cloud, including the Call of Duty, Overwatch and World of Warcraft franchises.

Prologue to progress

The prologue to all this was written by the Competition and Markets Authority (CMA), a non-ministerial government department (NMGD) that oversees all-things antitrust in the U.K.

With the European Commission (EC) approving the Activision deal (albeit with conditions), and the U.S. Federal Trade Commission (FTC) failing to block the deal, this meant that the CMA ultimately faced the wrath of one of the world’s biggest companies alone, on its hypothesis that the combined Microsoft and Activision company would “substantially weaken competition” and create “…the most powerful operator” in the cloud-gaming market.

While there are arguments to support or decry its position, the CMA’s remit applies purely to the U.K. market — so why is Microsoft giving up rights globally? The reality is, trying to oven-bake a U.K.-specific deal is impractical on a multitude of levels. If Microsoft wanted to gain approval from the CMA, it had to come back to the table with a restructured deal that didn’t make the U.K. appear like a second-class citizen.

“A U.K.-only remedy wouldn’t really be workable,” Tom Smith, a former CMA legal director who’s now partner at London-based law firm Geradin Partners, explained to TechCrunch. “U.K. consumers could miss out on developments that happen elsewhere — the CMA would be very sensitive about a perception that U.K. consumers are disadvantaged in the future.”

So Microsoft knew that any changes it made to its original deal had to apply globally to create a level playing field, so to speak. However, Microsoft had already reached a deal with the European Commission that would allow Activision games to be streamed via any other provider for the next 10 years.

“The CMA’s starting point would have been a worldwide deal because it’s a worldwide market, and it’s not obvious how you can slice it up geographically,” Smith continued. “However, they couldn’t do that because of the European Commission’s remedy, which covers the EEA and it wouldn’t be appropriate to somehow overrule it, so they’ve ended up with everything apart from the EEA.”

Additionally, there were various reasons why geo-restricting a deal to the U.K. just would not have worked. If Microsoft was to offload the cloud-streaming rights to a third-party, it would need to be commercially appealing.

And this all feeds into the bigger picture, vis-à-vis why Microsoft’s deal isn’t limited to the U.K. market. Besides any technical obstacles around geo-restricting content, if Microsoft was going to find a company to acquire the streaming rights, it had to make the deal attractive to them — and “rest of the world” is a lot more appealing than “U.K.”

“Part of the reason the CMA wanted to do this was so that Microsoft didn’t have a monopolistic position,” Chris Early, Ubisoft’s senior VP of strategic partnerships and business development, told TechCrunch. “If you only took those rights away in the U.K., and Microsoft still had those rights everywhere else in the world, then it might be able to have a monopolistic position for the rest of the world, enough so that it would affect the U.K. And they also had to think about whatever they do for the partner [which turned out to be Ubisoft] has to be commercially interesting enough.”

“In perpetuity”

So for Ubisoft, this deal means it has full and exclusive cloud-streaming rights to all current commercially available Activision games, as well as those released in the next 15 years. But more than that, it has this license in perpetuity, meaning it will never expire so long a Microsoft / Activision continue to make those games commercially available. Once the 15-year period is up, all subsequent games released by Activision won’t fall under the existing licensing agreement.

In theory, this could mean that Microsoft gradually pulls the plugs on all the games it has previously launched to circumvent the agreement it has with Ubisoft, once the 15 years is up. But Ubisoft reckons that if it does a good job, then this agreement shouldn’t be seen as a hindrance for Microsoft.

Indeed, Ubisoft’s rights extend beyond its own Ubisoft+ subscription service, allowing it to relicense access to the Activision Blizzard catalog to any other company, which it is incentivized to do.

“The only way we’re going to be commercially successful is if we’re pleasing players,” Early said. “If we’re pleasing players, then maybe it won’t be bad for Microsoft. My impression is they’re just going to continue their normal development roadmap, because if we do our job well in distribution, then lots of people are gonna have access to these games in other ways, and it’s not going to impact them.”

More TechCrunch

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

6 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?