Microsoft has offered to sell Activision's non-European streaming rights to Ubisoft Entertainment as a way to placate regulator concerns over the £55bn acquisition of the video game maker.
The proposal was announced on the same day that the CMA confirmed it is standing by its final decision to block the deal, claiming it would result in higher prices, fewer choices and less innovation for the video game market.
"The CMA has today confirmed that Microsoft's acquisition of Activision, as originally proposed, cannot proceed," said Sarah Cardell, the CMA's chief executive.
The regulator has now opened a phase 1 investigation into Microsoft's latest proposal, but stressed that the decision "is not a green light".
"We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments," Cardell added. "Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice."
Microsoft first announced its multi-billion deal to buy Activision in January 2022. The deal has been hailed as the "biggest takeover in tech history" and is already the largest acquisition in the history of the video game industry – at least in theory at this stage.
Microsoft said its new proposal was a "substantially different transaction" than the one proposed in 2022.
Under the new terms, Microsoft would not buy the rights for Activision's existing or new games stored in the cloud for at least 15 years.
The offer only applies to Activision's PC and console games outside the European Economic Area, as the deal has already been granted approval by EU officials, who stressed that Microsoft has offered to provide 10-year free licensing deals of Activision PC and console games to competitors.
The revised transaction would allow Ubisoft to commercialise these rights to other cloud gaming services providers, including Microsoft itself. However, it would prevent Microsoft from releasing Activision Blizzard games exclusively on its own cloud streaming service — Xbox Cloud Gaming.
Earlier this summer, Microsoft won a case against the US Federal Trade Commission (FTC) after a federal judge in California refused to block the multi-billion deal, which would see the company acquire hit titles such as Call of Duty and Candy Crush.
The CMA has estimated that Microsoft controls around 60 to 70 per cent of the global cloud gaming services, which are forecast to be worth up to £11bn globally and £1bn in the UK by 2026.
Ubisoft's shares listed in Paris were up 6.5 per cent following the announcement.
The CMA's decision on the new deal is expected by 18 October 2023.
