More news on Microsoft’s deal to acquire Activision Blizzard has been trickling in on the pushback on one of the biggest deals in the gaming sector.
New details on Microsoft’s attempt to acquire Activision Blizzard and convince worldwide regulators have been addressed of late. The deal would cost the giant tech company $68.7 billion, making it the biggest acquisition in the gaming industry. A lot of the pushback has been coming from the U.S. Federal Trade Commission (FTC), U.K.’s Competition Market Authority (CMA), and the Xbox competitor Sony.
A tweet from Axios’ Stephen Totilo confirmed that Microsoft subpoenaed Sony on January 17, which would potentially help their defence against the lawsuit the FTC has slammed for the acquisition of Activision Blizzard. The FTC’s case and other regulators have primarily called out how this deal would be threatening competition since Microsoft would have control over a big game franchise like the Call of Duty games, along with other major games from Activision Blizzard.
The subpoena on Sony could help Microsoft if the sales or engagement data from Sony proves otherwise and that Sony would still be thriving. This could be a strong argument as a lot of Sony exclusives have been doing extremely well, such as God of War: Ragnarok, The Last of Us, and the upcoming release of Forspoken. While Sony would most likely be withholding as much of their successes, it will be hard for Sony to hide too much.
Also, on January 17, the European Commission—executive arm of the government of the European Union—made a formal objection to the deal on the basis of antitrust risks. According to Reuters’ sources, a document outlining the grievances will be sent to Microsoft within the next few weeks. Not too much is known, but Microsoft will most likely respond by offering some kind of compromise with the Commission.
Google and NVIDIA added their concerns on the deal, echoing Sony’s case that the deal would threaten competition. While Google and NVIDIA were not in direct competition with Microsoft, they still have some crossover, like NVIDIA’s GeForce Now service competing with Microsoft’s Cloud Gaming service. NVIDIA did not explicitly state their opposition to the acquisition deal, but said that the Activision Blizzard games would need to remain open and allow equal access.
Google’s problems with the deal were less about the fact that Stadia had recently closed and more about the fact that Microsoft would be acquiring Candy Crush. This would greatly impact Google’s interest in mobile gaming.
Going back a couple of weeks, January 6 saw Microsoft announcing their stance to bring its pro-union approach to Activision Blizzard. The ad that ran in the Washington Post read:
“As we enter a new year, we remain committed to creating the best workplaces we can for people who make a living in the tech sector. When both labor and management bring their voices to the bargaining table, employees, shareholders and customers alike benefit. During 2023, we hope to bring the same agreement and principles to Activision Blizzard, which Microsoft has proposed to acquire.”
This was a major step and improvement to Activision Blizzard’s working conditions and Microsoft’s case against the FTC. The ad also highlighted how the tech giant had successful unionization of 300 Bethesda and ZeniMax employees when they acquired those companies. The ad concluded with the final notes: “We aren’t asking the FTC to ignore competition concerns. On the contrary, we believe it’s important to explore solutions that protect competition and consumers while also promoting the needs of workers and economic growth and American innovation.”
On January 5, Microsoft retracted its statements and claims that the FTC’s case violated the U.S. Constitution. Microsoft’s public affairs spokesperson David Cuddy told Axios, “The FTC has an important mission to protect competition and consumers, and we quickly updated our response to omit language suggesting otherwise based on the constitution. We initially put all potential arguments on the table internally and should have dropped these defences before we filed. We appreciated feedback about these defences and are engaging directly with those who expressed concerns to make our position clear.”
Essentially, they apologized for messing up. On January 3, the first pretrial for the FTC’s lawsuit took place—attempting to block the merger deal. At the time, the Commission said, “there are no substantive discussions at this time.” This spelled bad news for Microsoft, but the tech company has been known to smooth things over and create compromises with regulators and government bodies in the past. The odds are still in favour of Microsoft to close the Activision Blizzard deal before the deal expires in July 2023, yet the trial is not set to begin until August.
Additionally, on January 5, the U.K.’s CMA stated how they needed more time to investigate further on the deal, initiating what they called “phase two” of the deeper look into the merger. Deliberations and final verdicts were supposed to wrap by March 1 but were pushed back to April 26. The CMA seemed to be against the deal, with the help of Sony’s case; however, a public consultation found that a majority of responses were in favour of the deal.
Also in favour of Microsoft’s acquisition of Activision Blizzard was Chile’s National Economic Prosecutor’s Office, which became the latest international regulator to approve the deal. They noted that they did not see how the deal would significantly reduce competition, nor did they think that Microsoft would make Call of Duty games exclusive to Xbox. So far, Chile, Brazil, Saudi Arabia and Serbia have announced their approval of the merger.
Another troubling case that may work against Microsoft has been a recent Securities and Exchange Commission (SEC) filing submitted last week on January 18. It stated intentions to cut jobs primarily in the VR, Mixed Reality and HoloLens departments:
“On Jan. 18, 2023, Microsoft Corporation announced to its employees a series of actions it is taking in response to macroeconomic conditions and changing customer priorities. These actions include workforce reductions of approximately 10,000 employees by the end of the third fiscal quarter of 2023, changes to our hardware portfolio, and lease consolidation to create higher density across our workspaces.”
Last Friday, AltspaceVR—a virtual reality company Microsoft acquired back in 2017—tweeted that the company would be shutting down on March 10. Reports have said that these cuts have already begun, along with the layoffs for the “Mixed Reality Tool Kit” (MRTK) group. This team was responsible for the company’s open-source mixed reality framework for Unity and has now cancelled its planned new version release. This move was compared to Meta laying off 11,000 employees back in November when it rebranded.
More updates will follow, with the next major deadline being on April 11. This will be when the European Commission’s verdict is expected to be announced to the public.