Microsoft-Sony agreement opens way to seal $75bn Activision deal

Microsoft moved a step closer to sealing its contentious $75bn purchase of Activision Blizzard with the announcement on Sunday that arch-rival Sony has signed a licence for the games company’s most popular title, Call of Duty, after the deal is completed.

The agreement signalled a truce between the two gaming giants after a bruising 18-month battle that had seen the Japanese company become the biggest opponent to the acquisition. It follows regulatory breakthroughs for Microsoft on both sides of the Atlantic last week that have left it on the brink of clinching victory for a deal that is expected to reshape the gaming industry.

The pact appeared to resolve Sony’s biggest complaint about the acquisition, which it has said would hurt competition by giving Microsoft the power to make Call of Duty exclusive to its own Xbox game console and other services. The weekend agreement followed the failure late on Friday of a last-ditch legal attempt by US regulators to prevent the deal from closing.

Phil Spencer, head of Microsoft’s Xbox gaming division, said on Twitter that the companies had signed “a binding agreement to keep Call of Duty on PlayStation following the acquisition”.

Sony later confirmed the new licence, though both sides refused to give further details. Microsoft has already signed 10-year licences for Activision games with some other companies, including Nintendo, an unusually long period that it has claimed proves its intention to continue to make Activision’s games widely available.

Sony had earlier declined a Microsoft offer to license Activision’s games, adding fuel to regulatory attempts in the US and UK to try to block the deal. The software company claimed Sony had refused the licence and tried to block its deal for competitive reasons, rather than out of genuine concerns about how it might hurt gamers.

In its court battle with the FTC late last month, Microsoft pointed to an email from PlayStation chief Jim Ryan reassuring a colleague that the software company was not likely to turn Activision games into Xbox exclusives. In later video testimony shown during the hearing, Ryan said he changed his view after seeing details of the terms Microsoft was proposing. 

Microsoft’s earlier licensing offers included games for both the PlayStation console and PlayStation Plus subscription service. The US Federal Trade Commission had argued in court that the acquisition would hurt competition in the console, subscription and cloud streaming markets.

Though Sony does not have a pure streaming service, PlayStation Plus has a streaming feature, potentially meaning that a deal between the two companies could cover all the markets the US regulators have been concerned about.

A San Francisco court last week rejected the FTC’s request for an injunction to prevent the deal closing and two appeals against that ruling were denied.

The ruling in San Francisco, meanwhile, quickly brought an offer from the UK’s Competition and Markets Authority to put its own opposition to the deal on hold to give Microsoft a fresh chance to resolve its complaints.

As Microsoft and Activision Blizzard look for ways to address the UK competition regulator’s remaining concerns, the companies and the CMA will meet before the Competition Appeal Tribunal for a case management conference on Monday.

Microsoft had appealed against the CMA’s April decision to block the deal but last week both parties requested that the CAT postpone that case as they reopened negotiations.

The CAT had not yet responded to that request ahead of Monday’s hearing.