After intense regulatory scrutiny that appears to be slowly lurching to an end, Activision and Microsoft have agreed to extend the deadline to finish the multi-billion dollar merger.
In January, Activision and Microsoft announced the deal, where Microsoft would pay $95.00 per share to buy the game maker. It has been examined by the regulatory agencies of the world, with the latest chapter prior to Wednesday's extension being the US Federal Trade Commission's loss in court.
The deal was supposed to conclude July 18. In a last-minute deal, the pair has announced that the deal period has been extended to October 18, 2023.
The terms of the new agreement include an increase in the termination fee payable to Activision Blizzard if the merger does not conclude. The fee goes from $3.0 billion to $3.5 billion if the transaction is terminated after August 29, 2023, and climbs to $4.5 billion if the transaction is terminated after September 15, 2023.
The agreement also includes undisclosed amendments to Activision Blizzard's commercial Xbox arrangements with Microsoft, which the companies say is valued at up to $250 million for each of fiscal years 2023 and 2024.
UK regulatory concerns are the last road block
One hurdle remains, though. The UK Competition and Markets Authority (CMA) believes that Microsoft would find it "commercially beneficial to make Activision games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions)."
Despite a lengthy comment period, the CMA said that Microsoft "failed to effectively address the concerns in the cloud gaming sector." Furthermore, it noted that it was "not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows."
"Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming, CMA panel chair Martin Coleman said. "This deal would strengthen that advantage giving it the ability to undermine new and innovative competitors."
The CMA estimates that Microsoft already has around 60% to 70% of global cloud gaming services and also owns Xbox, which includes Xbox Cloud Gaming. Consequently, it believes the Activision deal could "reinforce this strong position and substantially reduce the competition" that Microsoft would otherwise face.
However, in the wake of the FTC's loss, the CMA is holding open the assessment period. It's not clear what remedies will be demanded, and it's also still not clear if it fully understands the market it is addressing.
Microsoft is not the dominant player in video gaming, nor is it at all clear if it has the majority stake in cloud gaming — which in itself is a very small percentage of the overall gaming market.
Sony's PlayStation has a larger market share of the global console market as it stands in February 2023. And Microsoft said that it would use the fruits of the merger to take on Apple to increase competition, not decrease it.
Microsoft has also said to the CMA that it will continue publishing Activision titles on the PlayStation console for years to come. Doing otherwise would be an incredibly bad idea from a financial standpoint, as the market favors the competing console.