Microsoft continues to fight for the acquisition of Activision Blizzard. Now, the U.S. tech company is willing to make initial concessions to competitor Sony so that EU competition regulators can quickly approve the deal. The main point is: A licensing agreement with Call of Duty that runs for 10 years.
According to the news agency “Reuters”, Microsoft is reportedly planning initial concessions to Sony in the $69 billion deal with Activision Blizzard (via reuters.com).
In January 2022, Microsoft announced that it wanted to acquire the CoD and WoW company. Since then, it has been fighting before the competition authorities worldwide against the impression that Microsoft’s market power would become too large after the acquisition of Activision Blizzard.
The biggest opponent: competitor Sony. They regularly argue that Microsoft would gain too much control with the “Call of Duty” brand. Sony expresses concern that many PlayStation players would be lost if CoD were to be released exclusively for PC and Xbox.
While competition authorities in countries like Brazil, Saudi Arabia, and Serbia have already approved the deal, negotiations continue before the British authority “CMA” and the European body “ECA”. The deal has not yet been cleared in the U.S. either.
And apparently, Microsoft is now ready for initial concessions.
Call of Duty: Contract should secure CoD on PlayStation for 10 years
What concessions are these? Reuters reports, citing individuals familiar with the case. Microsoft is planning a series of concessions to Sony.
The key point is a licensing agreement. This is supposed to legally ensure that Call of Duty remains on PlayStation for 10 years. Other points from the document are not mentioned.
Why is Microsoft making concessions? Reuters states that such “behavioral concessions” could help accelerate the acquisition process in the EU.
Currently, the EU authorities are creating a list of competitive concerns, with a deadline in January. The publication of this list could be expedited by the new concessions.
Stephane Dionnet, partner at the law firm McDermott Will & Emery, told Reuters: “Ultimately, such a move could secure an early approval from the European Commission and then be used by the parties before other antitrust authorities.”
Is this a strong concession? Compared to other competition cases, this is just a small concession. Microsoft is offering what they have been repeating for months:
In other cases, acquiring companies had to give up part of their business or divest other parts of their business fields.
An example is provided by Handelsblatt (via handelsblatt.com). The German company Linde AG wanted to acquire the U.S. firm Praxair. This would have resulted in the world’s largest gas company.
Linde made significant concessions. They sold Praxair’s entire gas business to a Japanese competitor and even exited the joint venture that had formed as a result. The EU competition regulators then approved the deal.
However, that was not enough for the American authorities: they demanded further divestitures of Linde’s business in the U.S.
This also illustrates that different authorities set different standards – but the composition of the market also plays an important role.
In the case of Linde and Praxair, the former number 2 and 3 in the gas market sought to merge, and the $60 billion deal had been controversial from the start.
The distribution in the gaming market looks different. According to Statista, Microsoft was in 4th place in Q1 2022 with just over $3 billion in revenue and Activision Blizzard in 9th place – between EA and Bandai Namco (via statista.com).
Together, the two companies would slightly exceed Sony and move up to 2nd place. Sony reached just over $4.3 billion in revenue in the first quarter (all figures excluding hardware sales).
By a wide margin, the Chinese company Tencent holds 1st place. In Q1 2022, it generated over $8 billion in revenue: One gaming company is larger than Sony, Nintendo, and Microsoft – And their emblem is a damn penguin
