Microsoft-Activision deal: Key things to know

Microsoft on Wednesday faced its biggest challenge yet in its effort to buy US video game powerhouse Activision Blizzard, with the decision by the UK to block the deal.

In January 2022, Microsoft pitched the biggest acquisition in the history of the sector with its offer to buy Activision Blizzard for $69 billion. (REUTERS)

Microsoft on Wednesday faced its biggest challenge yet in its effort to buy US video game powerhouse Activision Blizzard, with the decision by the UK to block the deal.

The transaction, which was expected to be finalized this year, would beef up Microsoft's muscle in the booming gaming market while playing to its strengths in software and cloud computing.

Here are key things to know about the blockbuster transaction:

- Video game titans -

Buying Activision, the maker of "Call of Duty" and "Candy Crush", would make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony.

China-based Tencent is the biggest player in terms of revenue, dominating the Asian market and investing in game studios across the world.

The firm owns Riot Games, maker of battle royale hit "League of Legends," and has stakes in French game star Ubisoft.

It also acquired the Finnish studio Supercell ("Clash of Clans", "Clash Royale", "Brawl Stars") in 2016 for $8.6 billion -- a record at the time.

Japanese consumer electronics colossus Sony has sold more than 500 million PlayStation consoles since 1994.

Through a subsidiary, it controls a host of studios -- including Insomniac and Housemarque -- that have developed exclusive titles for its machines such as the "Spider-Man" saga.

It strengthened its portfolio in January 2022 with a $3.6 billion acquisition of Bungie, the makers of "Halo" and "Destiny", though "Halo" is still owned by Microsoft.

Sony also invested $2 billion in April 2022 in Epic Games, the company behind "Fortnite".

- "Call of Duty" -

To keep up, Microsoft has been adding to its stable of game studios as it invests in developing the Xbox consoles as well as the trend of games being streamed directly from the cloud.

But in January 2022, the American behemoth pitched the biggest acquisition in the history of the sector with its offer to buy Activision Blizzard for $69 billion.

The deal would see the software titan get its hands on major titles such as "Call of Duty", "World of Warcraft" and "Diablo".

The group behind the Xbox consoles already has control of games like "Minecraft", "Elder Scrolls" and "Fallout" thanks to earlier acquisitions.

And it is now setting its sights on becoming the "Netflix of video games" with its Game Pass online platform that allows users to download games or play them via the cloud.

- Antitrust scrutiny -

The new slate of titles, and its ambitions for the cloud, drew the scrutiny of regulators in the United States, European Union and Britain.

The focus has mainly revolved around "Call of Duty" and Microsoft has recently agreed deals with many companies to give access to games, including the smash hit franchise.

But the UK regulator said in its decision that the deal still overly affects the growing cloud-gaming market and leads to less choice for gamers, pointing to Microsoft's built-in advantages through its Windows operating system and cloud.

- Hostile to women -

The 2022 proposal to buy Activision came when the company was especially vulnerable facing a number of accusations of fostering a "frat boy" work culture that was hostile to women.

Activision in February agreed to pay $35 million to settle charges from a US securities regulator over its disclosure policies on workplace harassment complaints.

In September 2021, the company established an $18 million fund to settle claims alleging sexual harassment and gender discrimination in an agreement with a different federal agency, the US Equal Employment Opportunity Commission.

The company still faces a lawsuit from the California Department of Fair Employment and Housing, where the outcome is uncertain.