European Union regulators approved Microsoft's proposed acquisition of gaming firm Activision Blizzard for $69 billion. However, this approval is subject to remedies offered by Microsoft to address antitrust concerns, particularly in the field of cloud gaming.

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One of the key remedies provided by Microsoft is the assurance that users will be able to stream Activision games they purchase on any cloud streaming platform, rather than being limited exclusively to Microsoft's platforms.

This approval from the European Union is a significant victory for Microsoft, especially considering that the United Kingdom's Competition and Markets Authority (CMA) had previously blocked the deal last month. The CMA's concern was primarily related to potential reduced competition in the nascent cloud gaming market, as it believed Microsoft might make Activision's key games exclusive to its own cloud gaming platforms, such as Call of Duty.

Activision Blizzard is renowned for developing popular console and PC games like the Call of Duty franchise and World of Warcraft. The EU's decision comes after Microsoft faced opposition to the deal from regulators and competitors, including Sony, the maker of PlayStation games console.

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The EU decision comes after the U.K. Competition and Markets Authority last month blocked the deal over concerns that it would reduce competition in the nascent cloud gaming market. The CMA said that Microsoft would find it commercially beneficial to make Activision’s key games, such as Call of Duty, exclusive to its own cloud gaming platforms. The CMA nevertheless said the acquisition would not reduce competition in the console market.

Microsoft has faced opposition to the deal from regulators and some of its rivals, including PlayStation games console maker Sony.

To address the concerns raised by the European Commission, Microsoft's President Brad Smith had met with EU officials in February. As a result, Microsoft committed to bringing Xbox PC games to Nvidia's cloud gaming service, which helped allay concerns about exclusive access to Activision games.

In addition, Microsoft has entered into a significant agreement with Nintendo, which entails a 10-year deal to bring the popular Call of Duty franchise to Nintendo's gaming platforms, provided that the acquisition of Activision Blizzard is successfully completed.

The European Commission conducted a thorough examination of various aspects of the Microsoft-Activision deal, including its potential impact on competition in the console market and the rapidly growing cloud gaming sector.

In terms of the console market, the EU Commission determined that the acquisition would not diminish competition since Sony's PlayStation already holds a dominant position.

A significant focus of the investigation revolved around cloud gaming. Cloud gaming enables users to stream games from servers, eliminating the need for dedicated hardware like consoles. These games can be played on devices such as TVs, smartphones, and laptops. Microsoft sees cloud gaming as a crucial part of its future strategy.

The success of cloud gaming relies on having an extensive catalog of games available through subscription services, akin to Netflix. This was one of the driving factors behind Microsoft's interest in acquiring Activision.

The UK regulator expressed concerns about Microsoft potentially gaining a dominant position in cloud gaming even before it becomes widespread.

The EU regulators found that Microsoft's acquisition could harm competition in the distribution of PC and console games via cloud gaming services, particularly if Microsoft made Activision games exclusive to its own platform.

However, Microsoft offered remedies to address these competition concerns. Users who have purchased or will purchase an Activision game will be able to stream those titles on any cloud gaming platform of their choice. Microsoft will also provide royalty-free licenses to cloud gaming platforms for streaming Activision games, as long as the consumer has purchased them. The aim is to allow gamers the flexibility to stream games on the platform of their choosing, irrespective of where they made the purchase.

A senior official from the European Commission stated that this move would foster competition in the market and grant streaming platforms that previously lacked access to Activision games the opportunity to offer them to their users.

Even with the approval from the EU, Microsoft still has to tackle the challenge of convincing other regulators, such as the U.S. Federal Trade Commission (FTC) and rivals like Sony, that its acquisition of Activision won't negatively impact competition.

The ongoing case between Microsoft and the FTC remains to be settled. However, a senior official from the European Commission stated that they have had close cooperation with the FTC, and they have shared views on several occasions regarding the case.

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