NTDOY - Microsoft Sony still at odds in UK over 'Call of Duty' $69B Activision deal

2023-03-08 11:39:38 ET

Wednesday's release of formal responses from Microsoft ( NASDAQ: MSFT ) and Sony ( NYSE: SONY ) to a UK antitrust probe of Microsoft's proposed $69B takeover of Activision Blizzard ( NASDAQ: ATVI ) shows the rivals mainly sticking to ongoing arguments for - and against - the deal.

Antitrust sentiment on the deal to date has largely focused on two areas in which Microsoft could abuse market power: Potentially restricting access to Activision's perennial best-selling videogame series Call of Duty, and the prospect of leveraging access to Activision's games to bolster Microsoft's Xbox Game Pass cloud gaming service at the expense of rivals like Sony's PlayStation Plus.

Microsoft has proposed a 10-year deal licensing Call of Duty to Sony, an offer similar to deals that Microsoft struck with Nintendo ( OTCPK:NTDOY ) - makers of the third key rival game console, the Switch - and to Nvidia ( NVDA ), which runs the GeForce Now game streaming service.

"Microsoft has no intention of engaging in input foreclosure or of making Call of Duty exclusive to the Xbox platform," Microsoft ( MSFT ) says in its response to the UK's Competition and Markets Authority. "To the contrary, since day one, Microsoft has been focused on using this acquisition to bring more games to more people on more platforms and devices than ever before, to bring more competition into gaming than ever before."

After the transaction, "CoD will remain available on PlayStation, the largest console platform globally, and PC," Microsoft adds, noting it wants to expand the game's reach to 150M more players via the Nintendo and Nvidia deals.

"A divestment of any part of Activision or CoD would extinguish these benefits and be ineffective," and preserve the status quo, the company added.

Divestment is exactly what Sony ( SONY ) is pushing for in its response , saying any access commitment "would be inadequate."

Sony Interactive Entertainment "agrees with the Remedies Notice that divesting parts of Activision’s business could also address the CMA’s competition concerns." That Remedies Notice proposes divesting either the Call of Duty business, the Activision business segment, or both the Activision and Blizzard business segments, Sony noted.

"These divestment options would ensure that critical Activision content, such as Call of Duty and, under the CMA’s third option, World of Warcraft, would remain in independent hands," Sony said.

Meanwhile, simply blocking the deal outright also allays the CMA's concerns, Sony argued. "The Remedies Notice identifies prohibition of the Transaction as a 'comprehensive solution' to the competition concerns the CMA has identified in the PFs. It also finds that the risks of this remedy 'are very low.' SIE agrees."

The UK's CMA is set to rule on the deal April 22. Meanwhile, Microsoft's offered remedies are expected to help its deal pass muster with the European Union .

Following a closed-door hearing with EU regulators last month, Microsoft Brad Smith said he was "ready to sit down and pull out a pen" to help reach a licensing deal with Sony .

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