Microsoft has finally made a binding deal with its rival in the videogame space, Nintendo, to let it distribute Call of Duty and other popular Xbox titles in response to regulators’ concerns about the dominance that the Redmond-based company will gain if it completes the acquisition of Activision-Blizzard.
The President of Microsoft, Brad Smith, announced in a tweet published today, where he stated that the agreement consists of a 10-year binding contract that gives Nintendo full feature and content parity.
“We’re more than willing, given our strategy, to address the concerns that others have, whether it’s by contracts, like we did with Nintendo this morning, or whether it’s by regulatory undertakings, as we’ve consistently been open to addressing”, Smith reportedly told regulators according to a report from Bloomberg.
The announcement was made ahead of a crucial meeting with regulators and a handful of companies that either support or oppose the Activision-Blizzard deal. The closed-door gathering is scheduled to take place today and Brad Smith will be among the participants for Microsoft.
The company headed by Satya Nadella first proposed the deal to Nintendo in December last year. Back then, Sony opposed the offering and deemed it “inadequate on many levels” in a statement made by its Chief Executive Officer, Jim Ryan.
Regulators are Worried that Microsoft Will Gain an Unfair Edge if it Owns CoD
Regulators from the European Commission, the US Federal Trade Commission, and the United Kingdom’s Competition and Markets Authority (CMA) have voiced their concerns about the deal and have prompted the company founded by Bill Gates to come up with possible remedies to their allegations.
In the case of the FTC, the agency has opposed the deal arguing that the deal “would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription and cloud-gaming business”.
Meanwhile, the UK’s CMA has said that the merger could harm gamers within the country they regulate as the tech firm will be able to increase prices and impose unfair conditions on gamers who use other consoles such as Sony’s PlayStation or Nintendo’s flagship device.
The CMA has suggested that Microsoft should either spin off the assets tied to Call of Duty from Activision or sell one of the two divisions to a third party with no ties to it. Even though these are the modifications that the CMA favors, the agency has also proposed that sufficiently ample “behavioral remedies” could also be accepted.
One example of such a measure is this binding agreement signed with Nintendo to give it access to this and other popular titles developed by Activision-Blizzard. However, Sony has not agreed to a similar agreement and that makes the Japanese tech conglomerate the primary roadblock to the completion of the deal in Europe.
Microsoft’s Ability to Complete the Merger Comes Down to Bringing Sony on Board
The statutory deadline from the CMA to reach an agreement with Microsoft in regards to the merger is set for 26 April this year. If no remedies are offered by the tech company before that, the CMA will ultimately ban the firm from completing the takeover.
Today’s meeting is crucial to Microsoft (MSFT) to secure the support of its rival to move forward with the merger. In the case of the FTC, which has adopted a more hostile position in regards to the merger, the tech firm has said that it has every intention to take the case to court if it comes to that.
Back in January 2022 when Microsoft first announced its intention to acquire the videogame developer for $68.7 billion, it stated that it expected to close the deal at some point in 2023 subject to the fulfillment of customary conditions.
The software developer surely expected some opposition from regulators and competitors down the road as its advance will result in the company gaining a powerful edge in a market that is currently dominated by Sony and Nintendo with market shares of 43% and 37% respectively according to data from 2021.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.