Microsoft teams up with Ubisoft to save its mega-merger with game publisher Activision

After obtaining the green light from Brussels, eliminating the threat of a lawsuit with the American Federal Trade Commission and pacifying relations that were electric to say the least with its competitor Sony PlayStation, Microsoft now has only one obstacle left in front of its project. of merger with the American video game leader Activision Blizzard: the British competition authority, fiercely opposed to this transaction costing 75 billion dollars.

This Tuesday, the Competition and Markets Authority (CMA) confirmed its veto to the merger, which it considers dangerous for future developments in the video game market. But Microsoft has pulled out of its sleeve an unexpected proposal that could reshuffle the cards. The American giant has found an ally to come to its rescue. This is the French Ubisoft, whose action took off by more than 10% on the Paris Stock Exchange.

Of course, the irruption of the owner of the Assassin's Creed and Prince of Persia licenses into this tortuous file is far from disinterested: the publisher based in Saint-Mandé (Val-de-Marne) could well hit the jackpot thanks to this covenant. Under this partnership, Ubisoft will become the exclusive, in perpetuity, licensee of Activision Blizzard's PC and console games for so-called "cloud gaming" services worldwide, with the exception of European Union. This alliance concerns the bottom of the catalog of the American publisher but also all the productions which will appear in the fifteen years following the merger with Microsoft.

The powerful Call of Duty, Diablo, World of Warcraft, Overwatch and Crash Bandicoot licenses will therefore expand the "cloud gaming" component of the Ubisoft subscription, distributed on PC and Xbox consoles. The French group will also be the single point of contact for streaming platforms wishing to include Activision Blizzard productions in their offers. Provided, of course, that the CMA gives its approval to this new arrangement. The deadline is October 18.

As Netflix and Disney allow watching videos without downloading, "cloud gaming" allows you to play video games without delay on any connected screen. For the video game industry, it's the promise of greatly expanding its consumer base by removing the obligation to buy expensive computers and consoles. In any case, this is what Microsoft hopes, which is strongly pushing this revolution. And this is what worries the British antitrust. In the eyes of the regulator, Microsoft could head and shoulders dominate this still in its infancy market, and with an uncertain future, by depriving the competition of the very popular games of Activision Blizzard...

By joining forces with Ubisoft, the American group wants to remove this concern. "Microsoft will not be in a position to release Activision games exclusively on its own cloud gaming service, nor will it control the licensing terms of these games from competing services," its president said in a statement. Brad Smith. This intermediary position will not be free for Ubisoft. The French will remunerate Microsoft via a single payment upstream, then via a royalty mechanism whose calculation method is confidential.

For financial analysts, this partnership is double good news for Ubisoft. First of all for its image, and this, while the publisher has been in difficulty since 2020 with a 60% drop in its stock market price. "Microsoft is designating Ubisoft as a partner of choice in the nascent 'cloud gaming' market," notes Jefferies. It is also for the publisher's finances and the valuation of its assets if the cloud gaming market ends up taking off.

For BNP Exane, this deal could even become "a major revenue and profit driver" for Ubisoft. But the bank points out that it is difficult to estimate the medium and long-term impact of this alliance, given the unknowns on future revenue sharing with Microsoft and the uncertain future of the "cloud gaming" market. If the latter imposes itself in the future as music and video streaming before it, then it's the jackpot. If consumers continue to shun it, it will be a blow in the water.