In a significant development, a federal appeals court has denied the Federal Trade Commission’s (FTC) request to temporarily halt Microsoft’s acquisition of video game giant Activision Blizzard. This decision removes one of the final obstacles to completing the $69 billion deal, which is set to be the largest in Microsoft’s history and the gaming industry as a whole.
The ruling by a three-judge panel for the 9th Circuit Court of Appeals upholds the previous decision of a California federal district court judge, who stated that the transaction could proceed while the FTC’s antitrust challenge remains pending.
Although the FTC’s lawsuit alleging that the merger would harm competition is still ongoing, legal experts consider this ruling a win for Microsoft. They argue that the costs incurred by Microsoft to keep the deal afloat during the FTC’s lawsuit would reach a tipping point, as the agency has no deadline to resolve the case.
While the deal has yet to gain approval from UK regulators, the Competition and Markets Authority (CMA) has paused its legal proceedings against the acquisition to engage in renewed negotiations with Microsoft. As part of the agreement, Microsoft has committed to pay Activision a $3 billion breakup fee if the deal fails to close within a specified timeframe.
Brad Smith, Microsoft’s president and vice-chair, expressed appreciation for the court’s swift response in denying the FTC’s motion to further delay the Activision deal. Smith believes this decision brings them one step closer to completing the acquisition amidst the ongoing global regulatory reviews.
The acquisition’s key focus lies in Activision Blizzard’s highly lucrative “Call of Duty” video game franchise, which generates billions in revenue each year. With this acquisition, Microsoft aims to combine “Call of Duty” and Activision’s other game franchises with its existing first-party titles like “Halo” and “Forza.” This move would position Microsoft as the second-largest home console maker by revenue, surpassing Nintendo and trailing only Sony. In terms of global revenue, Microsoft would become the third-largest gaming company, trailing Tencent and Sony.
While global regulators in the EU, Brazil, China, Japan, and South Korea have already approved the deal, the UK’s CMA has expressed concerns regarding the potential dominance of Microsoft in cloud gaming. The CMA fears that this could result in reduced innovation and limited choices for UK gamers in the future. To address these concerns, Microsoft has entered agreements with Nintendo and Nvidia, assuring that the “Call of Duty” game will remain available on competing platforms for at least the next decade.
The denial of the FTC’s bid to pause Microsoft’s acquisition of Activision has significant implications for the gaming industry and the future landscape of console gaming. With Microsoft’s extensive resources and established position in the gaming market through its Xbox console, the addition of Activision Blizzard’s powerhouse franchises like “Call of Duty” could potentially reshape the industry dynamics.
The “Call of Duty” franchise, in particular, has been a major revenue driver for Activision Blizzard, consistently generating billions of dollars in sales. Its inclusion in Microsoft’s portfolio would not only strengthen the company’s position as a console maker but also enhance its competitive edge against rivals like Sony and Nintendo.
However, concerns have been raised by the UK’s CMA regarding the potential impact on cloud gaming and the long-term implications for gamers. The fear is that Microsoft’s dominance in this sector could result in limited innovation and reduced options for UK players. To address these concerns, Microsoft has made commitments to ensure the availability of “Call of Duty” on rival platforms, such as Nintendo’s Switch, for a minimum of 10 years.
As the regulatory reviews continue, the outcome of the deal will shape the future of the gaming industry, particularly in terms of competition, innovation, and consumer choice. The decision by the federal appeals court to deny the FTC’s request brings Microsoft one step closer to realizing its ambitious acquisition, while legal experts anticipate the resolution of the underlying antitrust lawsuit filed by the FTC.
Overall, this ruling marks a significant development in the Microsoft-Activision merger, with far-reaching implications for the gaming industry as a whole. The deal’s successful completion would cement Microsoft’s position as a major player in the gaming market and potentially reshape the competitive landscape for years to come.
