It seems like the tides might be turning for Microsoft and its recent acquisition of Activision Blizzard now that it’s been put under more intense scrutiny by several regulator agencies and antitrust authorities in the UK, US, and European Union. Some insiders have begun to worry about the fact that this deal could very well blow up and not happen to begin with.
Now, Microsoft’s been painting a very rough picture of itself and Xbox while trying to make its case regarding the acquisition of the Call of Duty company. The company has revealed that Cloud gaming isn’t the way of the future, that Xbox consoles still are sold at a loss, and other trivia that makes them look like the underdog against its competitor and most vocal opposition: Sony and PlayStation.
So, what now? Well, we still have yet to see what’s going to happen come November 8, when we get to hear more about whether the European Commission will permit the deal to go into its next phase. A Microsoft spokesperson told the Post in a statement that they have worked on taking the necessary steps to make the deal go forward.
Microsoft’s $69 billion Activision buyout is facing heightened scrutiny from regulators — and some insiders at the game studio behind “Call of Duty” are worried that the Xbox maker could effectively blow up the deal, The Post has learned.
Antitrust authorities in the US, United Kingdom and European Union are all reviewing the proposed deal, which would see Microsoft buy out Activision for $95 per share.
Activision shares rocketed above $82 when the buyout was announced in January but have since fallen to below $73 as of Thursday, indicating increasing investor skepticism about the deal going through.
Some insiders and analysts have said that Microsoft — which has enjoyed a better relationship with regulators in recent years compared to rivals like Meta and Google — likely did not expect this level of scrutiny from authorities. The increasing pressure has left the companies at odds behind the scenes, sources close to the situation said, even as Activision and Microsoft are publicly putting on brave faces and insisting the deal will go through.
At issue are the promises — or lack thereof — that Microsoft is offering antitrust regulators and gaming rivals like PlayStation maker Sony, which has loudly opposed the deal.
Microsoft gaming CEO Phil Spencer has publicly said that the company plans to continue releasing Activision’s popular “Call of Duty” series on PlayStation, as well as potentially bring it to other consoles such as the Nintendo Switch.
Microsoft’s $69 million Activision buyout is facing increased scrutiny from regulators.NurPhoto via Getty Images
But Microsoft has declined to offer EU regulators any legal remedies ahead of an expected full-scale probe that could kick off on Nov. 8, Reuters reported last week. Microsoft had the option of offering the EU so-called behavioral remedies, such as a formal promise to keep “Call of Duty on PlayStation,” but declined to do so. The company could still do so later on during a full-scale probe.
Bobby Kotick-led Activision would prefer that Microsoft take a more accommodating stance with regulators now, since the game-maker’s shareholders will get paid out regardless of whether Microsoft makes concessions, Activision insiders and analysts said.
“If you’re Activision, you want Microsoft to offer everything forever for free,” a hedge fund analyst closely following the deal told The Post. “But that obviously destroys the economics of the deal.”
Bobby Kotick-led Activision would prefer that Microsoft take a more accommodating stance with regulators, sources said.Getty Images
Some analysts and critics argue that the option of keeping Activision games exclusively on Xbox is a large part of the deal’s appeal for Microsoft, despite the company’s statements about keeping “Call of Duty” available on PlayStation. While making public assurances is one thing, being legally bound to abandon exclusives could be a dealbreaker, sources said.
“Microsoft’s decision to buy Activision is all about exclusivity,” Wedbush Securities managing director Dan Ives told The Post. “If giving up exclusivity is one of the required concessions, Microsoft is going to have to think long and hard if this is still the right deal.”
“Microsoft isn’t buying this asset so other companies can use Activision games to the same extent,” Ives added. “It all comes down to what the concessions are.”
“If you’re Activision, you want Microsoft to offer everything forever for free,” a hedge fund analyst said.picture alliance via Getty Image
MoffettNathanson research analyst Clay Griffin likewise said: “Microsoft can’t be forced to accept draconian conditions.”
If the European Commission, UK’s Competition and Markets Authority or American Federal Trade Commission squash the deal, Microsoft will have to pay Activision a $3 billion break-up fee — a relative drop in the bucket for the $1.7 trillion tech giant.
In a statement to The Post a spokesman for Activision said “We’re very appreciative of our close working relationship with Microsoft. We’re confident in the deal and its progress, and we know Microsoft is working diligently to get it done. Any suggestion to the contrary is false.”
In a statement to The Post, a spokesman for Microsoft said, “From the moment this acquisition was announced, we’ve worked urgently to show we’re serious about taking the steps needed to earn approval – including making proactive commitments about how we’ll run our business with gamers and developers at the center. The process has progressed as expected and will still anticipate the deal to close on schedule.”
Still, Microsoft is legally obligated to use its “best efforts” to close the deal — and Activision could sue the Xbox maker if it believes Satya Nadella-led company purposefully blew up the buyout.
Activision could sue Satya Nadella-led Microsoft if it believes the company blew up the deal.Bloomberg via Getty Images
While Activision’s most recent “Call of Duty” has so far been the best-selling game in franchise history, Barron’s reported, the deal falling apart could still pose a financial threat to the company.