WEBVTT - Big Stories of 2023: The Microsoft-Activision Blizzard Deal 0:00:04.480 --> 0:00:12.640 Welcome to Tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.680 --> 0:00:16.160 and welcome to tech Stuff. I'm your host, Jonathan Strickland. 0:00:16.200 --> 0:00:18.959 I'm an executive producer with iHeart Podcasts and How the 0:00:19.000 --> 0:00:22.760 tech are you? So as twenty twenty three winds down, 0:00:22.840 --> 0:00:24.919 we're looking back on some of the big tech stories 0:00:24.920 --> 0:00:28.320 that happened this year. I mentioned this one a few times, 0:00:28.680 --> 0:00:30.320 but I figured it would be better to do a 0:00:30.360 --> 0:00:35.640 full look back on Microsoft's acquisition of Activision Blizzard, which 0:00:35.640 --> 0:00:38.839 actually obviously stretches back more than a year. It was 0:00:38.920 --> 0:00:42.160 never a guaranteed deal and there was a significant amount 0:00:42.159 --> 0:00:44.360 of opposition to it all around the world. So today 0:00:44.880 --> 0:00:47.360 we're going to look at how the story began and 0:00:47.400 --> 0:00:49.960 how it unfolded, as well as we'll speculate a little 0:00:49.960 --> 0:00:52.120 bit about the future now that the two companies have 0:00:52.240 --> 0:00:55.640 put ink to paper. Now, let's start off with background 0:00:55.760 --> 0:01:00.040 on Activision Blizzard. The company traces its history to the 0:01:00.080 --> 0:01:04.959 earliest days of home video game markets. Activision launched out 0:01:04.959 --> 0:01:07.840 of Atari when a group of folks decided that it 0:01:07.920 --> 0:01:11.240 might be nice to receive credit and royalties for their work, 0:01:11.720 --> 0:01:14.520 rather than all that sweet cash and credit going to 0:01:14.560 --> 0:01:19.720 the company itself. So Activision made some real bangers like Pitfall, 0:01:19.959 --> 0:01:23.200 which if you're old like I am, you might remember 0:01:23.400 --> 0:01:28.080 fondly compared to more recent games. Of course, it's primitive, 0:01:28.520 --> 0:01:33.000 but trust me, at the time, Pitfall was amazing. Skip 0:01:33.040 --> 0:01:35.639 ahead to nineteen ninety one and a guy named Bobby 0:01:35.720 --> 0:01:40.160 Kodik would, along with some financial partners, by a significant 0:01:40.200 --> 0:01:43.480 amount of stock in Activision. He would later become the 0:01:43.520 --> 0:01:47.760 CEO of the company. That same year, the company that 0:01:47.800 --> 0:01:51.040 would become Blizzard would form. The original name for a 0:01:51.080 --> 0:01:54.160 Blizzard was Silicon and Synapse when it was launched in 0:01:54.280 --> 0:01:57.640 ninety one, but it took the name Blizzard in ninety four, 0:01:58.280 --> 0:02:02.200 and Blizzard also published some real bangers in video and 0:02:02.200 --> 0:02:05.600 computer games. It's the company behind Warcraft, which was a 0:02:05.680 --> 0:02:10.720 huge hit in the real time strategy community. They produced Diablo, 0:02:10.919 --> 0:02:13.960 which was a huge hit among the how many times 0:02:13.960 --> 0:02:16.880 can I click my mouse button in a row? Community, 0:02:17.440 --> 0:02:20.720 and it launched World of Warcraft, the I Will Never 0:02:20.840 --> 0:02:24.359 see the light of day again community, among many others. 0:02:25.080 --> 0:02:28.960 By the two thousands, Activision was creating or publishing genre 0:02:29.200 --> 0:02:34.840 defining franchises like Call of Duty and Guitar Hero. Blizzard's 0:02:34.919 --> 0:02:39.800 game StarCraft would become a cornerstone of esports. Blizzard also 0:02:40.000 --> 0:02:43.359 changed hands multiple times in the early two thousands, ending 0:02:43.440 --> 0:02:45.920 up with a company called Vivendi Games out of France. 0:02:46.680 --> 0:02:49.840 Activision merged with Vivendi in two thousand and eight and 0:02:50.160 --> 0:02:53.920 the new company was called Activision Blizzard and Bobby Kotik 0:02:54.240 --> 0:02:59.520 became CEO of this newly merged company. Activision Blizzard continued 0:02:59.560 --> 0:03:03.000 to develop, up and publish successful games and franchises. It 0:03:03.040 --> 0:03:07.560 became one of the largest video game companies in the world. Now, 0:03:07.800 --> 0:03:12.320 let us switch gears to talk about Microsoft. Now, obviously 0:03:12.400 --> 0:03:16.040 Microsoft has had a really long history as well. I 0:03:16.040 --> 0:03:18.320 think it's safe to say that the company is best 0:03:18.360 --> 0:03:21.760 known for the Windows operating system. It's also the company 0:03:21.800 --> 0:03:25.960 behind the Office suite of productivity software like Word and Excel. 0:03:26.800 --> 0:03:31.120 Oh and it has a long history of Shenanigan's ranging 0:03:31.240 --> 0:03:34.639 from misleading business deals which go all the way back 0:03:34.680 --> 0:03:37.200 to the earliest days of the company, with Bill Gates 0:03:37.240 --> 0:03:40.760 pulling a fast one on rivals, to a legal case 0:03:40.760 --> 0:03:44.520 that very nearly forced Microsoft to break up into smaller companies, 0:03:44.840 --> 0:03:47.480 but a subsequent judge in the US would overrule that 0:03:47.560 --> 0:03:51.760 decision later on. Microsoft has been a big part of 0:03:51.800 --> 0:03:54.520 gaming for a really long time as well. The first 0:03:54.680 --> 0:03:57.840 edition of Microsoft Flight Simulator launched in nineteen eighty six, 0:03:58.520 --> 0:04:01.440 but this title was actually built on an older simulator 0:04:01.440 --> 0:04:05.840 that originally came out in nineteen seventy seven. Microsoft waded 0:04:05.840 --> 0:04:08.480 into the video game console wars in two thousand and 0:04:08.480 --> 0:04:12.560 one with the launch of the original Xbox console. The 0:04:12.720 --> 0:04:15.320 Xbox three sixty would follow in two thousand and five, 0:04:15.760 --> 0:04:18.680 and then Xbox One would come out in twenty thirteen. 0:04:19.520 --> 0:04:24.320 In twenty fourteen, Microsoft acquired Mojang Studios, the company behind 0:04:24.400 --> 0:04:29.719 the insanely popular title Minecraft, and in twenty twenty, Microsoft 0:04:29.760 --> 0:04:33.360 launched the most recent version of the Xbox. The Series 0:04:33.520 --> 0:04:37.160 X is the flagship. There's also the Series S. In 0:04:37.240 --> 0:04:40.760 recent years, Microsoft has focused more on video games as 0:04:41.040 --> 0:04:44.880 its business model has shifted quite a bit so in 0:04:45.000 --> 0:04:49.719 years past, new versions of Windows and updates to the 0:04:49.839 --> 0:04:52.920 Office Suite where the flagship products for the company. That's 0:04:53.480 --> 0:04:56.800 mainly what they focused their sales on, but the revenue 0:04:56.800 --> 0:04:59.960 strategy has changed a bit. It focuses more on subscrib 0:05:00.000 --> 0:05:04.880 options than product sales, and they also have other services 0:05:04.920 --> 0:05:08.600 that they make money from, like cloud computing. Video games 0:05:08.600 --> 0:05:11.440 and consoles are one of the product lines that are 0:05:11.440 --> 0:05:14.599 still going strong in Microsoft, though there are also subscription 0:05:14.680 --> 0:05:18.120 elements to those as well, and Microsoft faces a couple 0:05:18.200 --> 0:05:22.640 of heavy hitters in the video game industry, namely Sony 0:05:22.920 --> 0:05:26.800 and to a lesser extent, Nintendo, but Sony is the 0:05:26.839 --> 0:05:30.360 real rival to Microsoft's total domination of the home video 0:05:30.400 --> 0:05:36.200 game market. In twenty twenty one, a scandal erupted at 0:05:36.320 --> 0:05:40.240 Activision Blizzard. Now, to be clear, the problem that was 0:05:40.560 --> 0:05:43.400 the focus of the scandal had been in place for 0:05:43.440 --> 0:05:46.720 a really long time, but in twenty twenty one it's 0:05:46.720 --> 0:05:50.720 when it all sort of became public dirty laundry. Multiple 0:05:50.760 --> 0:05:53.520 parties came forward and accused the company of allowing a 0:05:53.680 --> 0:05:58.599 toxic environment to flourish. At Activision Blizzard. There were allegations, 0:05:58.600 --> 0:06:03.120 like serious allegations of stuff like sexual harassment cases, including 0:06:03.279 --> 0:06:06.080 at least a couple that were really more bordering on 0:06:06.120 --> 0:06:10.680 sexual assault cases, and a lot of the stories ended 0:06:10.760 --> 0:06:13.200 up being the same where employees were told that they 0:06:13.240 --> 0:06:16.800 had to settle the matter internally within the company and 0:06:17.160 --> 0:06:20.279 that human resources was supposed to be the first and 0:06:20.360 --> 0:06:25.640 really only resort. Meanwhile, that department was allegedly burying these matters, 0:06:25.720 --> 0:06:28.760 so that they wouldn't go any further. There were other 0:06:28.880 --> 0:06:32.480 serious allegations as well, claiming the company discriminated against women, 0:06:32.640 --> 0:06:34.880 and that it violated the law in how the company 0:06:34.880 --> 0:06:37.960 treated pregnant women, and that it was also guilty of 0:06:38.000 --> 0:06:42.320 retaliating against employees who brought issues up, another thing that 0:06:43.000 --> 0:06:47.560 is against the law. The accusations also said that Bobby Kotik, 0:06:47.640 --> 0:06:50.640 the CEO of the company, was fully aware of the 0:06:50.720 --> 0:06:54.400 situation and that he did nothing about it, or worse, 0:06:55.080 --> 0:06:58.000 not that he did nothing, but that he also faced accusations. 0:06:58.040 --> 0:07:02.960 They specifically withheld in from the board of directors. There 0:07:02.960 --> 0:07:06.360 were folks calling for Kodek's resignation, a call that CODEC 0:07:06.720 --> 0:07:12.440 pointedly ignored. Not at the time, very few people knew 0:07:12.600 --> 0:07:14.760 what was going on behind the scenes, but this was 0:07:14.800 --> 0:07:19.400 when Microsoft was in early negotiations considering an acquisition of 0:07:19.400 --> 0:07:23.080 the company, and it wasn't public knowledge yet. A big 0:07:23.080 --> 0:07:26.880 move like that requires stability in both companies that are 0:07:26.920 --> 0:07:30.120 part of a merger, and while a change in leadership 0:07:30.720 --> 0:07:34.080 might have been appropriate considering the accusations involved over at 0:07:34.080 --> 0:07:38.720 Activision Blizzard, it would also make the acquisition process more complicated, 0:07:39.200 --> 0:07:43.320 and apparently business wins out over matters of toxicity and 0:07:43.960 --> 0:07:48.320 abuse of employees. So Kdek stayed put, and various employees 0:07:48.360 --> 0:07:53.480 in US agencies filed lawsuits against Activision Blizzard. The company 0:07:53.520 --> 0:07:57.080 actually settled one of those lawsuits out of court in 0:07:57.120 --> 0:08:01.280 September twenty twenty one. It agreed to settle a similar 0:08:01.360 --> 0:08:05.720 lawsuit just this year, after Microsoft had already completed the acquisition. 0:08:06.880 --> 0:08:10.760 There's a dark legacy of sexual discrimination that Activision Blizzard 0:08:10.840 --> 0:08:15.240 must overcome, and there are different camps that view the 0:08:15.280 --> 0:08:18.960 acquisition in very different ways with regard to that. There 0:08:18.960 --> 0:08:22.800 are some who worry that with Microsoft acquiring Activision Blizzard, 0:08:23.760 --> 0:08:26.920 the new parent company is just going to sweep everything 0:08:27.000 --> 0:08:30.400 under the rug and walk away and make that just 0:08:30.440 --> 0:08:32.319 a matter of the past, and no one will ever 0:08:32.360 --> 0:08:37.320 see any justice from the various indignities and worse that 0:08:37.360 --> 0:08:42.480 they experienced under Activision Blizzard. The other camp hopes that Microsoft, 0:08:42.520 --> 0:08:45.840 by taking charge, will actually address these things in a 0:08:45.920 --> 0:08:50.600 way that is accountable and will end up seeing justice 0:08:50.679 --> 0:08:54.679 done for the people who were negatively impacted by Activision 0:08:54.760 --> 0:08:58.600 Blizzard's environment, and that perhaps Microsoft will clean house as 0:08:58.640 --> 0:09:01.240 part of the process. Some of that has actually come 0:09:01.280 --> 0:09:04.920 to pass, as we have seen some changes in executive 0:09:05.000 --> 0:09:08.679 leadership in recent days, but we'll get back to that. 0:09:09.400 --> 0:09:15.480 So on January eighteenth, twenty twenty two, Microsoft announced its 0:09:15.520 --> 0:09:19.560 intention to acquire Activision Blizzard. The transaction was to be 0:09:19.640 --> 0:09:23.600 all in cash nearly sixty nine billion, with a b 0:09:23.840 --> 0:09:27.600 dollars worth of cash, which is a whole lot of cash. 0:09:28.120 --> 0:09:31.280 According to the press release that Microsoft was behind, this 0:09:31.320 --> 0:09:35.120 would put Microsoft in third place among video game companies, 0:09:35.200 --> 0:09:38.440 at least by revenue. They said that the Chinese company 0:09:38.480 --> 0:09:42.040 Tencent was in number one and the Japanese giant Sony 0:09:42.520 --> 0:09:46.800 was in place number two, and I suspect Microsoft listed 0:09:46.840 --> 0:09:51.079 Sony this way, acknowledging it as a larger video game company, 0:09:51.880 --> 0:09:55.360 because it was a strategic move. I'm pretty sure that 0:09:55.440 --> 0:09:59.240 Microsoft and Activision Blizzard knew that this merger was going 0:09:59.320 --> 0:10:02.480 to face scrutine all around the world, and it would 0:10:02.480 --> 0:10:04.839 mean two very powerful companies in the video game space 0:10:04.880 --> 0:10:07.600 would consolidate, and that could be viewed as a threat 0:10:07.640 --> 0:10:10.960 to competition in the overall industry. So they end up 0:10:11.000 --> 0:10:14.000 pointing out, hey, even if we're together, Sony is still 0:10:14.040 --> 0:10:17.400 bigger than we are. It was kind of a strategic 0:10:17.400 --> 0:10:20.560 way of saying we're not a threat to competition. Look, 0:10:20.960 --> 0:10:23.480 we still won't be as big as Sony or Tencent. 0:10:24.480 --> 0:10:28.079 But as it turns out, that scrutiny would exactly follow 0:10:28.640 --> 0:10:32.520 it in the way that Microsoft anticipated, and Sony would 0:10:32.520 --> 0:10:36.319 play a very large heart of it. I'll talk more 0:10:36.400 --> 0:10:38.840 about this, but first let's take a quick break to 0:10:38.880 --> 0:10:50.080 thank our sponsors. All Right, we're back. I had talked 0:10:50.120 --> 0:10:54.680 about how Microsoft was trying to kind of pregame by saying, hey, 0:10:54.760 --> 0:10:57.840 even when we're together, we're gonna just be in third place, 0:10:58.480 --> 0:11:01.040 And they're positioning it in a way where they're like, hey, yay, 0:11:01.120 --> 0:11:03.480 we're all the way moving up to third place. But 0:11:03.559 --> 0:11:05.320 it was kind of a sly way of saying, there's 0:11:05.320 --> 0:11:08.160 still two companies that are bigger than us, even given 0:11:08.280 --> 0:11:14.680 this this merger. The situation also explained why Bobby Kodick 0:11:14.880 --> 0:11:18.120 was adamant with regard to staying in charge at Activision Blizzard. 0:11:18.400 --> 0:11:22.000 Before it looked like he was just doubling down as 0:11:22.160 --> 0:11:25.800 a leader of a company that had a callous attitude 0:11:25.840 --> 0:11:31.040 toward employees, specifically employees who were also women. But now 0:11:31.080 --> 0:11:34.480 the complication of this massive business deal put things into 0:11:34.679 --> 0:11:38.679 a new perspective, people said, Aha, this is why Bobby 0:11:38.760 --> 0:11:42.240 Kodick refuses to step down. It's not that he really 0:11:42.320 --> 0:11:46.240 thinks he's in the right here, but because there's this massive, 0:11:46.480 --> 0:11:50.040 sixty nine billion dollar deal going on and he doesn't 0:11:50.080 --> 0:11:52.320 want to mess it up by stepping down and having 0:11:52.360 --> 0:11:56.600 someone else take charge. So it got very cynical for 0:11:56.679 --> 0:11:59.880 good reason. It didn't take long for folks to screw 0:12:00.360 --> 0:12:03.239 the deal and for people to start raising their concerns. 0:12:03.520 --> 0:12:07.160 In fact, in April twenty twenty two, several US senators 0:12:07.160 --> 0:12:10.360 wrote a letter to the Federal Trade Commission, or FTC 0:12:11.240 --> 0:12:15.160 about this proposed merger, and they cited worries about consolidation 0:12:15.240 --> 0:12:18.520 in the tech industry in general, which does make sense 0:12:18.559 --> 0:12:21.880 because there is a very small collection of very large 0:12:21.920 --> 0:12:25.360 companies that dominate the tech space here in the United States, 0:12:25.760 --> 0:12:29.000 and Microsoft is one of them already, and their move 0:12:29.080 --> 0:12:32.280 appeared to be in alignment with concentrating even more power 0:12:32.960 --> 0:12:37.360 within that small group of companies. The senators also reference 0:12:37.440 --> 0:12:42.440 the ongoing investigations and litigations surrounding Activision Blizzard. They were 0:12:42.679 --> 0:12:45.440 among those who were worried that a merger could mean 0:12:45.480 --> 0:12:49.320 that employees who had been affected by the activities of 0:12:49.320 --> 0:12:52.439 Activision Blizzard might find themselves without means to have their 0:12:52.480 --> 0:12:56.080 issues addressed in the wake of a merger, like how 0:12:56.080 --> 0:12:59.440 can they see justice if there's a new boss in 0:12:59.520 --> 0:13:04.680 charge in the just essentially say upslates wipe clean. But 0:13:04.800 --> 0:13:07.760 the real opposition to the deal, I would argue came 0:13:07.760 --> 0:13:12.160 from overseas. Specifically in the United Kingdom. The Competitions and 0:13:12.200 --> 0:13:17.120 Markets Authority or CMA launched an investigation into the deal 0:13:17.240 --> 0:13:20.120 out of concern that it would lead to significant decrease 0:13:20.240 --> 0:13:24.320 in competition in video games. There were worries that Microsoft 0:13:24.360 --> 0:13:29.240 would reserve Activision Blizzard titles to Microsoft exclusive platforms like 0:13:29.520 --> 0:13:34.400 Xbox consoles and Windows based PCs, that Microsoft would deny 0:13:34.520 --> 0:13:38.720 companies like Sony and Nintendo from getting access to really 0:13:39.400 --> 0:13:43.880 hugely popular video game franchises, and that this would constitute 0:13:43.880 --> 0:13:49.240 anti competitive practices. Essentially, they were worried about Microsoft locking 0:13:49.280 --> 0:13:52.839 all of these popular video game titles to an exclusivity 0:13:52.880 --> 0:13:58.640 deal with itself. Microsoft repeatedly committed to giving its competitors 0:13:58.720 --> 0:14:02.880 access to those pop titles. Time and again, a Microsoft 0:14:02.920 --> 0:14:07.120 representative would refute the concerns, and this got to a 0:14:07.160 --> 0:14:12.320 point where Microsoft agreed to sign to ten year commitments 0:14:12.679 --> 0:14:16.640 that would cement that Microsoft would not lock games like 0:14:16.679 --> 0:14:20.640 the Call of Duty franchise behind an exclusive arrangement. It 0:14:20.720 --> 0:14:24.000 turned out that Sony representatives had been raising concerns with 0:14:24.120 --> 0:14:28.120 regulators about this very thing. That Sony had been arguing 0:14:28.760 --> 0:14:32.240 Microsoft and Activision Blizzard merging together would cause direct harm 0:14:32.360 --> 0:14:37.200 to companies like Sony and Nintendo, and ultimately, they argued consumers. 0:14:37.960 --> 0:14:43.400 Sony reps also said that Microsoft would squeak around guarantees right. Oh, sure, 0:14:43.440 --> 0:14:46.280 they'll release the game, but they'll make sure that the 0:14:46.320 --> 0:14:49.320 Microsoft version of the game has more features and more 0:14:49.400 --> 0:14:52.640 content in it, and that the version that gets released 0:14:52.680 --> 0:14:57.320 to platforms like PlayStation or Nintendo consoles will be stripped 0:14:57.360 --> 0:15:01.080 down and inferior. Maybe they'll have a content, maybe it'll 0:15:01.120 --> 0:15:03.880 be lower fidelity, something along those lines, maybe it'll have 0:15:03.920 --> 0:15:09.160 performance issues. By the way, Sony locking stuff behind exclusive 0:15:09.240 --> 0:15:12.520 content for themselves is something that they have done a 0:15:12.560 --> 0:15:14.600 lot of, so you could argue they knew a lot 0:15:14.640 --> 0:15:16.960 about this kind of idea because they themselves had sort 0:15:17.000 --> 0:15:20.920 of perfected it. But no matter, I think the concern 0:15:21.600 --> 0:15:25.280 was a legitimate one, even if Sony itself had been 0:15:25.280 --> 0:15:29.360 guilty of doing the same thing to other platforms. Phil Spencer, 0:15:29.680 --> 0:15:33.280 the head of the Xbox division over at Microsoft, ultimately 0:15:33.400 --> 0:15:36.160 made a public statement that said the company would release 0:15:36.240 --> 0:15:39.800 Call of Duty titles to PlayStation for as long as 0:15:39.840 --> 0:15:43.800 there's a PlayStation to release titles too. Essentially said, we're 0:15:43.800 --> 0:15:46.000 never going to get out of the business of creating 0:15:46.120 --> 0:15:50.320 video games for other platforms. It doesn't make sense because 0:15:50.360 --> 0:15:54.000 while we could dominate the market and be anti competitive, 0:15:54.280 --> 0:15:57.560 there's more money to be made by making titles for 0:15:57.640 --> 0:16:01.720 other platforms. That's that's what we want to do, ultimately, 0:16:01.840 --> 0:16:05.760 is make more money, not have some sort of, you know, 0:16:06.240 --> 0:16:11.240 de facto dominance in the market. This was after more 0:16:11.280 --> 0:16:14.160 than a year of back and forth in various regulatory arenas. 0:16:15.120 --> 0:16:19.440 So not only did the two companies face stern opposition 0:16:19.560 --> 0:16:23.000 in the UK, here in the United States things were 0:16:23.040 --> 0:16:26.920 getting thorny as well. The Federal Trade Commission announced it 0:16:26.960 --> 0:16:30.680 was opposed to the deal. In fact, the FTC sued 0:16:30.840 --> 0:16:35.240 Microsoft to stop the deal from happening. Again. The concern 0:16:35.400 --> 0:16:38.080 was that the deal marked a decrease in competition in 0:16:38.120 --> 0:16:40.360 the market and that it would give Microsoft an unfair 0:16:40.400 --> 0:16:44.080 advantage over other companies. And again this is something that 0:16:44.120 --> 0:16:47.320 Microsoft has a well earned reputation of doing in the past, 0:16:47.440 --> 0:16:50.880 So it's not like Microsoft is some innocent babe in 0:16:50.880 --> 0:16:56.360 the woods. The company has been found guilty of engaging 0:16:56.360 --> 0:16:59.960 in anti competitive practices. So in some ways you can 0:17:00.120 --> 0:17:02.600 look at this as the FTC saying, ah, you're back 0:17:02.640 --> 0:17:06.720 up to year old tricks again Microsoft. By early twenty 0:17:06.800 --> 0:17:10.960 twenty three, the European Union had also jumped into this mess, 0:17:11.480 --> 0:17:14.320 and regulators in the EU said that they too were 0:17:14.400 --> 0:17:17.920 concerned about the deal. At this point, things were starting 0:17:17.920 --> 0:17:22.800 to look pretty uncertain. Microsoft and Activision Blizzard were facing 0:17:22.840 --> 0:17:27.160 critical scrutiny in the UK, the EU, and the US. 0:17:28.160 --> 0:17:31.280 That's a lot of initials. The deal was supposed to 0:17:31.320 --> 0:17:34.360 close in the summer of twenty twenty three, but at 0:17:34.359 --> 0:17:36.879 this point that seemed like that was going to be 0:17:36.920 --> 0:17:40.280 wishful thinking. In fact, the deal itself was by far 0:17:40.800 --> 0:17:45.800 not a guarantee. There were serious doubts coming up. For 0:17:45.840 --> 0:17:48.760 a few short weeks, things actually started to look up 0:17:48.800 --> 0:17:53.720 for Microsoft and Activision Blizzard because the CMA, potentially the 0:17:53.760 --> 0:17:58.119 harshest critic of all the regulators. Arguably the FTC wins 0:17:58.160 --> 0:18:01.360 out in the end, but the CMA had serious concerns 0:18:01.359 --> 0:18:05.000 about this deal, but in March of twenty twenty three, 0:18:05.520 --> 0:18:09.040 CMA said, you know what, we're not as concerned about 0:18:09.040 --> 0:18:11.480 this whole thing as we used to be. They essentially 0:18:11.960 --> 0:18:14.840 said they were no longer concerned on March twenty fourth, 0:18:14.880 --> 0:18:20.640 twenty twenty three. However, on April twenty sixth, twenty twenty three, 0:18:21.200 --> 0:18:24.080 a month later, the CMA did another one to eighty 0:18:24.640 --> 0:18:28.120 and formally moved to block the deal from happening, saying Nope, 0:18:28.160 --> 0:18:31.320 we're not gonna let this go through. So what the 0:18:31.359 --> 0:18:35.480 heck happened? Where did CMA go from saying Okay, our 0:18:35.520 --> 0:18:38.199 concerns have been met to Nope, we can't allow this 0:18:38.240 --> 0:18:42.520 to happen. Well, according to the CMA, the new issue 0:18:42.520 --> 0:18:45.680 was a concern that the acquisition would create an unfair 0:18:45.720 --> 0:18:50.040 market in cloud gaming. Microsoft reps said the issue appeared 0:18:50.040 --> 0:18:53.960 to stem from a quote flawed understanding of the market 0:18:54.119 --> 0:18:57.719 end quote which is throwing some shade at the CMA. 0:18:58.240 --> 0:19:00.199 They also said something along the lines of it, sure 0:19:00.280 --> 0:19:03.040 is a shame that the CMA is determined to make 0:19:03.680 --> 0:19:07.840 the UK lag behind in technological innovation. Like it was 0:19:07.960 --> 0:19:10.800 kind of it was kind of like a like the mafia, 0:19:10.880 --> 0:19:13.320 making a threat in a way like the way that 0:19:13.600 --> 0:19:16.800 you see in mob movies where someone's like, hey, it's 0:19:16.800 --> 0:19:18.720 a nice shop you got here. Sure would be a 0:19:18.760 --> 0:19:23.480 shame if someone would, I don't know, set fia to it. 0:19:23.480 --> 0:19:26.240 It kind of felt like that sort of threat, like 0:19:26.280 --> 0:19:29.800 a threat that's worded in a way to potentially raise 0:19:29.920 --> 0:19:34.520 plausible deniability. But yeah, that's that's what Microsoft was saying. 0:19:34.520 --> 0:19:37.560 Plus they were just saying, y'all are stupid because you 0:19:37.560 --> 0:19:42.720 don't understand the market. Shortly after the CMA made its 0:19:42.840 --> 0:19:44.320 change of mind and said no, we're not going to 0:19:44.440 --> 0:19:47.800 let this go through, the EU regulators actually dropped their 0:19:47.880 --> 0:19:51.240 concerns and they approved the deal, so they removed one 0:19:51.280 --> 0:19:55.320 of the massive obstacles that were in the way of Activision, 0:19:55.320 --> 0:19:59.359 Blizzard and Microsoft, but the UK and the United States 0:19:59.359 --> 0:20:03.159 were still uncertain. Good news arrived in the US as 0:20:03.200 --> 0:20:06.600 a judge found that Microsoft's commitments to ensuring that popular 0:20:06.680 --> 0:20:10.840 titles would remain on competitors' platforms were sufficient enough to 0:20:10.920 --> 0:20:14.399 allow the deal to proceed. This knocked down the FTC's 0:20:14.440 --> 0:20:17.520 concerns on the matter. The judge said, well, Microsoft has 0:20:17.520 --> 0:20:22.680 made a commitment to negate the problems that the FTC 0:20:22.800 --> 0:20:26.359 has brought up, and as long as Microsoft follows that, 0:20:26.560 --> 0:20:29.719 then there's no anti competitive issue here because the company 0:20:29.720 --> 0:20:33.080 has committed to making sure that competitors have access to 0:20:33.119 --> 0:20:35.560 those titles. That was one of the cornerstones of the 0:20:35.600 --> 0:20:39.480 FTC's argument. So the judge said, FTC, your your argument 0:20:39.520 --> 0:20:42.680 doesn't have merit to it and essentially dismissed the case. 0:20:43.320 --> 0:20:47.000 This happened on July eleventh, and remember Microsoft hoped to 0:20:47.000 --> 0:20:50.520 close the deal in June twenty twenty three, so this 0:20:50.560 --> 0:20:54.639 is after when the original closing date was supposed to 0:20:54.680 --> 0:20:58.280 have happened. All Right, we've got a bit more to 0:20:58.320 --> 0:21:01.720 cover about this case, but before we can get to that, 0:21:01.800 --> 0:21:14.200 let's take another quick break to thank our sponsors. Okay, 0:21:14.280 --> 0:21:18.199 during its legal case with the FTC, Microsoft said some 0:21:18.240 --> 0:21:21.800 stuff that everyone already knew but that the company had 0:21:21.840 --> 0:21:25.760 never really admitted, namely, that Sony had run away with 0:21:25.840 --> 0:21:29.200 the victory in the console wars. Right in the announcement, 0:21:29.280 --> 0:21:33.119 Microsoft had mentioned that Sony was a larger company in 0:21:33.160 --> 0:21:37.000 the video game space than Microsoft was, but then this 0:21:37.280 --> 0:21:40.679 was slightly different. This was Microsoft saying that the PlayStation 0:21:40.840 --> 0:21:46.760 consoles consistently outsold Xbox consoles. Again, this wasn't a secret, 0:21:47.040 --> 0:21:50.520 like everyone knew this, but for Microsoft to acknowledge it 0:21:50.520 --> 0:21:53.600 seemed like it was a pretty big deal. And Microsoft 0:21:53.640 --> 0:21:56.600 was using it in defense right. They were saying, how 0:21:56.640 --> 0:22:01.040 could we be decreasing competition in a market when we're 0:22:01.080 --> 0:22:04.640 not the dominant player in the market, Sony dominates us. 0:22:05.160 --> 0:22:09.320 So this isn't bringing down competition, It's actually helping us 0:22:09.359 --> 0:22:12.520 improve our position in a market that is already extremely 0:22:12.560 --> 0:22:16.280 competitive and we are losing. So it helps support the 0:22:16.320 --> 0:22:18.920 story that Microsoft wasn't about to run away with everything. 0:22:19.640 --> 0:22:21.800 But I bet it's stung to say it out loud. 0:22:22.400 --> 0:22:26.720 The FTC, for its part, would appeal the ruling saying 0:22:26.760 --> 0:22:30.880 that hey, actually, our concerns are well merited and they 0:22:30.920 --> 0:22:34.240 we should be allowed to stop this merger. But that 0:22:34.320 --> 0:22:39.239 appeal is still pending as I record this episode, So 0:22:39.640 --> 0:22:42.320 that is a we'll talk about it again in a second, 0:22:42.320 --> 0:22:46.199 but it's an unresolved matter. But with the recent win 0:22:46.280 --> 0:22:49.760 for Microsoft and Activision Blizzard on the books, where a 0:22:49.840 --> 0:22:53.200 judge had said that Microsoft was fine to pursue this 0:22:53.800 --> 0:22:57.120 merger in the United States, the company's moved to convince 0:22:57.160 --> 0:23:01.280 the CMA back in the United Kingdom to reconsider their 0:23:01.320 --> 0:23:06.160 position of blocking the deal from happening. So they took 0:23:06.200 --> 0:23:08.879 the concerns that the CMA raised and they proposed a 0:23:09.000 --> 0:23:12.879 new deal in an attempt to mollify those concerns. So, 0:23:13.160 --> 0:23:16.960 for example, one of the concessions that Microsoft made was 0:23:17.000 --> 0:23:20.639 that it would sell the streaming rights to Activision Games 0:23:20.960 --> 0:23:26.159 to Ubisoft Entertainment for non European markets. This was a 0:23:26.200 --> 0:23:30.080 specific move to assuage the concerns that the deal would 0:23:30.080 --> 0:23:35.000 somehow unfairly impact the cloud gaming market. The CMA took 0:23:35.080 --> 0:23:39.920 this newly revised deal and they took their time reviewing it, 0:23:40.600 --> 0:23:44.200 and then finally in October, they dropped their opposition to 0:23:44.280 --> 0:23:48.000 the merger. The FTC was still urging US courts to 0:23:48.440 --> 0:23:52.320 review the case that they had appealed, but because there 0:23:52.440 --> 0:23:56.880 was no active appeal case going on, technically it meant 0:23:56.880 --> 0:23:59.240 there were no real legal obstacles in the way of 0:23:59.320 --> 0:24:03.240 Microsoft and Activision Blizzard, and so they finalized the merger 0:24:04.240 --> 0:24:08.680 that happened on October thirteenth, twenty twenty three. It took 0:24:08.880 --> 0:24:12.680 nearly a year and nine months from when Microsoft announced 0:24:12.760 --> 0:24:16.879 its plans to acquire Activision Blizzard to win the deal 0:24:17.000 --> 0:24:21.720 was actually finalized. Meanwhile, the FTC is still appealing that 0:24:21.840 --> 0:24:25.320 earlier court decision that ruled in favor of Microsoft. The 0:24:25.400 --> 0:24:29.879 FTC says it wants to unwind the merger. Now I 0:24:29.880 --> 0:24:32.960 don't think that's likely to happen, but I do think 0:24:33.040 --> 0:24:36.159 it may see Microsoft have to pay some sort of 0:24:36.400 --> 0:24:40.400 settlement out of court in the process. As I record this, 0:24:40.960 --> 0:24:44.520 the matter is still pending in US courts. Microsoft most 0:24:44.600 --> 0:24:48.840 recently successfully requested an extension to file a response to 0:24:48.880 --> 0:24:52.359 a motion to compel, so that is a motion that 0:24:52.400 --> 0:24:56.240 the FTC brought against Microsoft to compel Microsoft to share 0:24:56.600 --> 0:25:01.040 documentation relating to the case. The court has granted Microsoft's 0:25:01.080 --> 0:25:04.720 request and has extended the time limit to compel to 0:25:04.800 --> 0:25:08.680 that motion to January second, twenty twenty four. So while 0:25:08.680 --> 0:25:12.359 the acquisition has already happened back in October, the matter 0:25:12.400 --> 0:25:17.159 itself technically remains unresolved until next year, and that brings 0:25:17.240 --> 0:25:20.679 us up to speed on the whole matter. I suspect 0:25:20.720 --> 0:25:24.200 the merger will remain in place. The process of unwinding 0:25:24.200 --> 0:25:26.840 the deal seems so complicated that it's very hard to 0:25:26.920 --> 0:25:30.800 imagine a court commanding it to happen. Technically, I guess 0:25:30.880 --> 0:25:35.720 it could, but it seems unlikely. However, if the FTC's 0:25:35.760 --> 0:25:39.639 appeal actually works, this would send a massive message to 0:25:39.880 --> 0:25:43.639 businesses at large and the tech industry in particular, that 0:25:43.840 --> 0:25:48.960 there is a new focus on competition and antitrust situations. 0:25:49.840 --> 0:25:52.000 Then again, we also have to acknowledge that here in 0:25:52.000 --> 0:25:55.320 the United States, it's an election year in twenty twenty four, 0:25:55.960 --> 0:26:00.119 and if there's another change in administration, we're likely to 0:26:00.119 --> 0:26:03.760