Microsoft said on Friday it had closed its $69 billion purchase of video game giant Activision Blizzard, overcoming major regulatory hurdles in Britain and the United States and signaling that the tech industry giants are still free to use their reserves of cash to grow even more.
The deal, the biggest consumer technology acquisition since AOL bought Time Warner more than two decades ago, won approval from British regulators on Friday, the last remaining regulatory hurdle.
The completion of Microsoft’s acquisition of Activision is a clear sign that several years of governments around the world scrutinizing big tech companies have so far done little to curb their power, their growth, or their ability to sign megadeals. And the deal could provide a model for other big tech companies on how to successfully defend themselves against regulatory intervention.
Microsoft overcame obstacles in several countries from government officials who said the merger would curb competition in the video game industry.
Their challenges were part of a larger effort by governments around the world to take action against technology companies such as Microsoft, Google, Apple, Amazon and Meta, which owns Facebook. The Federal Trade Commission tried to stop Meta from buying a startup that makes a virtual reality fitness game. Last year, the Justice Department sued to stop a deal for a health technology company that it said would provide one of the country’s largest insurers with data on its competitors.
But both challenges failed. Although regulators have managed to block or force companies to abandon some deals (including those in the publishing, aerospace and semiconductor manufacturing industries), they have yet to achieve a major victory against one of the giant digital platforms that dominate commerce in line.
Nonetheless, regulators are pressing ahead with cases against technology companies. The Justice Department is in the middle of a lawsuit against Google, arguing that the company abused its power as an online search monopoly. The FTC is filing its own monopoly lawsuit against Meta, arguing that the company used the Instagram and WhatsApp acquisitions to kill off future competitors. In September, it sued Amazon, alleging that the company had hindered competition by pressuring merchants and favoring its own services.
Microsoft went through a complicated process for its megadeal that included getting approval from dozens of countries. It agreed to offer continued access to one of Activision’s flagship franchises, Call of Duty, on gaming platforms from other companies such as Nintendo and Sony.
In April, Britain’s regulatory agency, the Competition and Markets Authority, dealt the deal a blow by blocking its approval in Britain. But the regulator reversed its decision after Microsoft agreed to license to a rival a portion of Activision’s business associated with so-called cloud gaming, a small but promising new area for the industry.
The FTC unsuccessfully sought a preliminary injunction against Microsoft in the United States, which would have delayed the deal’s closing and potentially condemned it to a lengthy legal appeal process. The agency appealed that ruling, but the deal was able to close while the legal process plays out.
Phil Spencer, CEO of Microsoft Gaming, celebrated the closing of the deal in a blog post on Friday, pointing to concerns from rivals and regulators about gamers without an Xbox losing access to Activision games.
“Whether you play on Xbox, PlayStation, Nintendo, PC, or mobile, you are welcome here, and will continue to be welcome, even if Xbox isn’t where you play your favorite franchise,” he wrote.
Microsoft has not fully satisfied regulators and is taking a calculated risk of not being forced to undo the acquisition years later. An FTC case against the combination is still pending in its administrative court, in a process that could take years to resolve.
If the FTC prevails on that point, Microsoft can eventually appeal to almost any federal court of its choice. That means he could take the case to the same court that already ruled in his favor by denying the F.TC. his preliminary precautionary measure.
FTC spokeswoman Victoria Graham said the agency was focused on appealing the judge’s order that refused to block the deal from closing in the United States.
“The FTC continues to believe that this agreement is a threat to competition,” it said in a statement.
Microsoft convinced a federal judge in July that the FTC’s arguments that the merger harmed competition were not strong enough to prevent the deal from closing. The company then announced in August that it had reached a settlement aimed at addressing concerns from the CMA, the British regulator. Microsoft said it would give Ubisoft Entertainment, a rival game publisher, the rights to license all current and future Activision games for distribution on streaming platforms, meaning games played by leveraging the power of the cloud.
The CMA was concerned that Microsoft’s exclusive control over popular Activision games would help it achieve a monopoly in the nascent cloud gaming industry, but the deal with Ubisoft eased its concerns.
For Microsoft, closing the deal is “a victory for its Xbox strategy,” said Joost van Dreunen, a video game analyst who teaches at New York University. “It is also, perhaps more importantly, a victory for Microsoft as a company,” because it culminates a years-long effort to improve its relationship with regulators and in Washington, he said.
When it announced the acquisition in January 2022, Microsoft committed to closing the deal by mid-July of this year or paying Activision a $3 billion breakup fee. In the end, he needed a little more time and the two companies agreed to extend the deadline until mid-October.
Now, the merger has the potential to reshape competition in the video game industry. Microsoft has long been criticized for falling behind competitors such as Sony and Nintendo in the quality of its games, and has lacked a substantial presence in the fast-growing mobile gaming sector.
Activision’s King division, which produces the mobile game Candy Crush, will give Microsoft a significant boost in that area. The Call of Duty games alone have generated more than $30 billion in lifetime revenue. And Activision’s portfolio of other popular titles, such as Diablo and World of Warcraft, could make its gaming subscription service, Xbox Game Pass, even more attractive.
Activision had not allowed those featured titles on a subscription platform, betting it could make more money selling them individually. But Microsoft has indicated it will have no such qualms, because the future of its gaming ambitions depends on its Netflix-style Game Pass offering, which has more than 25 million subscribers paying around $10 a month to access a catalog of games. .
“With 25 million subscribers, they are losing money, but with 100 million, they are probably making money; at 200 million, they are making a lot of money,” said Michael Pachter, technology analyst at Wedbush Securities. “They know they’ll never get from 25 to 50 without a game like Call of Duty.”
Activision said this month which expected its games to start appearing on Game Pass sometime next year. In addition to offering Activision games on Game Pass, Microsoft has indicated that it plans to allow Activision continue operating as an independent studio. Still, coming under the Microsoft umbrella could be a win for both the company’s shareholders and employees, analysts said.
When the proposed merger was announced, Activision was undergoing cultural upheaval after a lawsuit in California accused the company of fostering a sexist work environment in which women were routinely harassed. Its chief executive, Bobby Kotick, faced calls to resign. He could now leave the company and earn more than $400 million for completing the merger.
Activision has said it has worked to improve its culture, strengthened anti-harassment policies and published a transparency report This year he detailed the actions he has taken and said that “there has never been widespread or systemic harassment.”
In a note to employees on Friday, Kotick wrote that “the combination with Microsoft will bring new resources and new opportunities to our extraordinary teams around the world.” He said he would remain at Activision until the end of the year, reporting to Mr. Spencer.
Spencer, on his blog, wrote that Microsoft’s gaming division had “a culture that strives to empower everyone to do their best work, where all people are welcome.”
As part of an agreement with the Communications Workers of America union last year, Microsoft also pledged to remain neutral to any Activision employee’s efforts to unionize, an initiative that began last year.
“The victory for people who are not in senior management,” van Dreunen said, “is that they will now work for an employer who perhaps maintains higher standards in their relationship with their employees.”
Karen Weiss and Adam Satariano contributed reports.
