The savior of Microsoft’s Activision Blizzard deal might be the most unlikely of new entrants in the drawn-out acquisition saga: Ubisoft. 

Microsoft this week made another, perhaps final, concession in its bid to get the Activision Blizzard acquisition over the finish line. In an unexpected twist, the company is giving up some cloud gaming rights to the French publisher, specifically the rights to stream current and future Activision Blizzard PC and console games, for a whopping 15 years. Ubisoft, as the benefactor of this regulatory compromise, will control how those games can be streamed on cloud gaming platforms like Xbox Game Pass, PlayStation Plus, and Amazon Luna.

In doing so, Microsoft hopes the U.K.’s Competition and Markets Authority will at long last give the deal the green light, after the company’s win in U.S. courts against the Federal Trade Commission last month and the European Commission clearance it gained back in May. The Ubisoft deal is a complicated one, and it promises to reshape the future of the global cloud gaming market, which remains a nascent but growing space. Let’s dive into the intricacies of this deal and try to make sense of its impact on the Xbox business, Game Pass, and the broader game industry. 

What the Deal Means for Xbox & Ubisoft

The pillar of Microsoft’s cloud gaming compromise is exclusivity. Under the original terms of the deal, Microsoft would be in control of how Activision Blizzard’s library — both current and in the future, and covering native and streamed games — could be distributed across platforms. That gave Microsoft a fair amount of leverage in how it could use major franchises like Call of Duty and Diablo to, say, grow its Game Pass subscriptions, push Xbox console sales, and otherwise gain an edge over Sony in subscriptions, cloud, and console gaming.

The general idea was that Microsoft could retain subscription (and by extension streaming) exclusivity over Activision Blizzard's library regardless of whether it was being licensed to be sold or being licensed to stream on, say, Nvidia GeForce Now. So even if Microsoft had to play nice with competitors over access, it would at the end of the day reap the most benefits via Game Pass growth, in line with its ecosystem strategy. 

Under the new deal terms, “Microsoft will not be in a position either to release Activision Blizzard games exclusively on its own cloud streaming service — Xbox Cloud Gaming — or to exclusively control the licensing terms of Activision Blizzard games for rival services." This is a major recalibration of how the deal will benefit Microsoft in the long run and how it fits into its overall subscription and cloud gaming strategies. 

The key word is “exclusively.” Microsoft is effectively ceding cloud streaming control of the IP it's purchasing to a third party, in this case Ubisoft, which can turn around and put it on its own platform, sell it back to Microsoft for use on Game Pass, and even sell it to other companies like Sony, Nvidia, or perhaps even Netflix. (It should be noted that this would be worldwide with the exception of the European Union, where Microsoft has already hammered out a compromise with regulators in exchange for approval that allows for more freedom of choice in cloud gaming providers for EU citizens.)

This is a big deal for Xbox because it does appear to undermine the Activision Blizzard purchase with respect to cloud gaming, at least looking further down the line when the technology has created a much larger and more viable market. By giving up the rights to exclusively control how games like Call of Duty are put on cloud gaming services, Microsoft will be sacrificing profits and losing out on the benefits of getting to dictate how Activision Blizzard’s library is leveraged to make Xbox Game Pass Ultimate more attractive. 

Given the length of the term at 15 years and that the rights are “in perpetuity,” this is not a light concession, though it must be acknowledged that cloud gaming remains a tiny slice of the market right now, and there’s no guarantee it will grow into a major segment in the 15-year time frame of the Ubisoft deal.  

But it is clearly what Microsoft feels is necessary to get the deal done, and right now it certainly feels like the path of least resistance given how insignificant cloud gaming revenues are to the global game industry right now. Xbox will still get paid, with Ubisoft compensating Microsoft “through a one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage,” though of course that may ultimately prove to be less beneficial to the Xbox business than owning exclusive rights. 

But at the end of the day, most people playing Call of Duty will do so not through the cloud, but on both Xbox and PlayStation, where the game will remain available for at least the next decade. But the crucial difference, and the only one that really matters, is that Microsoft will be able to offer new Call of Duty entries on Game Pass (after the expiration of Sony’s Activision deal in 2025), which is reason enough to either buy or play on Xbox and provides a clear incentive for Microsoft to pursue this strategy. 

Further down the line, however, the situation may grow more complicated. It’s conceivable that Ubisoft could sell the rights to companies with a stronger desire (and the resources and know-how) to better compete with Game Pass and Xbox Cloud Gaming. Regardless of whether that’s Netflix, Nvidia, or anyone else, the result could be meaningful harm to the distribution of Call of Duty games on consoles or eating into Game Pass subscriptions. In that event, Microsoft would have little recourse but to compete by offering a superior cloud gaming experience. Since 15 years is such a long time, there are several outcomes here that could disadvantage Microsoft and Game Pass. 

For Ubisoft, this is an obvious no-brainer, more from a profitability standpoint than from any real tangible benefit it might bring to Ubisoft+. Thanks to Ubisoft’s willingness to explore new technologies, including its partnerships with Google Stadia and Amazon Luna, the company does appear to be a relatively sensible and neutral third party in the context of this rather thorny deal. In addition to that, Ubisoft is a European company, a fact that may help balance the scales in the eyes of the CMA. 

In becoming a major cloud gaming arbiter of sorts, Ubisoft isn’t so much beefing up its own subscription platform so much as it’s getting ahold of extremely lucrative assets it can leverage without having to pay an exorbitant premium. At the same time, Ubisoft can bring previously unavailable Activision Blizzard titles to its own subscription platform, which is available to stream via Amazon Luna. There’s no situation here in which Ubisoft doesn’t benefit in some way, either from expanded subscriptions, improved profitability, or by getting to dictate some elements of the terms with which it licenses Activision Blizzard’s cloud gaming rights. 

For a company that’s been struggling with a tumbling stock, severe game delays, quality control issues, and excessive bloat, these streaming rights won’t magically fix any of its systemic problems, especially because it’s just cloud streaming and also won’t give Ubisoft the right to retain exclusives for Ubisoft+. But it does position Ubisoft to potentially work more closely with Microsoft — a Ubisoft+ bundling with Game Pass seems possible.

Where Does the Deal Go From Here? 

Despite giving up cloud rights, it’s not exactly smooth sailing for Microsoft from here on out. The company said it has a new deal deadline of October 18th, and the hope is that the CMA can finish its new regulatory review of the revised terms by that date and in compliance with the 90-day extension the two parties agreed on earlier this summer. 

The CMA was quick to release a statement saying “this is not a green light,” and adding that “we will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments,” according to CMA chief Sarah Cardell. “Our goal has not changed — any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

The European Commission also said it is now “carefully assessing whether the developments in the U.K. require another notification to the commission.” That means Microsoft may have to work with regulators there on yet another review to make sure that selling off cloud gaming rights to Ubisoft won’t complicate Microsoft’s commitments. For instance, a cloud gaming service in the EU, if it wants to operate in the U.K. or the U.S., might now need to license rights from Ubisoft instead of Microsoft as per the new deal terms. 

The most likely scenario, however, is that this all gets sorted over the next two months and the deal is approved. There appear to be far fewer issues the CMA could take with the deal now that Microsoft is so willing to undercut its cloud business worldwide and its subscription exclusivity advantage to get it passed. It also appears likely the EU and Microsoft will find a way to incorporate this new Ubisoft deal into its existing regulatory agreement. Though it’s now worth stressing that if the CMA continues to try and tank the deal, there would clearly be no actual market logic being applied and instead would be nothing more than a desire to block the merger on the grounds that "big is bad."

The FTC, on the other hand, seems even further out on a limb now than it was before. Although the agency is in the process of appealing its court loss to block the deal’s closing, there was a much larger focus put on Call of Duty console exclusivity during the FTC’s legal fight than on cloud gaming competition. So, it seems far-fetched to think the FTC has any legal grounds to continue fighting this deal before the October deadline. 

For Microsoft, the end of what is shaping up to be a nearly two-year regulatory battle waged across continents seems finally close at hand. But the road ahead is filled with considerable uncertainty around not only cloud gaming, but also whether this deal will be the secret weapon that helps it unlock Xbox’s true potential. But the lengths to which the company has gone are proof enough that it believes Activision Blizzard is vital to its future, and it’s willing to reshape its entire gaming business to bring it into the fold. 

---

This post appeared in the Sunday, August 24th version of Naavik Digest. If you enjoyed it, please consider forwarding it or sharing the piece with your followers. Also, remember to subscribe to Naavik Digest here.

Sponsored by Gamesight: The Growth Engine for the Largest Gaming Brands in the World

At Gamesight, we believe that creativity and data go hand in hand. Our data-driven approach gives you the insights you need to make creative decisions that drive results. Our measurement platform and creator-focused programs are like magic — they help brands grow, make more money, and make players happy all around the world.

Marketing Measurement

With almost a decade of battle-tested experience, Gamesight's attribution platform meets the unique needs of the most successful PC, Console, and Web3 game developers, including Capcom, Bungie, Netease, and Sky Mavis.

Creator Programs

Gamesight fuels the success of games with thriving creator communities. We ignite the flames of organic content creation through a unified creator program, fostering an engaged community that drives consistent growth and lasting triumph.

End-to-End Campaign Management 

Harness the power of data-driven targeted influencer discovery to seamlessly connect your game with the perfect influencers. Say goodbye to guesswork in strategy, execution, optimization, and reporting. Our unmatched expertise has propelled game launches to remarkable success, including titles like Magic The Gathering: Arena, Elden Ring, & Dead by Daylight.

#2 Game of the Week: Vampire Survivors(Switch Edition)

Platform: Nintendo Switch (Also available on Mac, PC, Xbox & Mobile)

Developer / Publisher: Luca Galante

State: Worldwide Launch

Genre: Roguelike / Shoot ‘Em Up

What You Need to Know: 

• Vampire Survivors is a unique twist on the standard roguelike formula that infuses shoot ‘em up and bullet hell mechanics with randomized 15- to 30-minute play sessions where players must survive as long as possible defeating exponentially larger waves of enemies. 
• The game remained relatively obscure for the first couple of months after release until it broke through in January 2022 and began amassing tens of thousands of concurrent players on Steam. Since then, the game has become a major hit, with releases on Xbox Game Pass and mobile. It has also won numerous accolades, including Best Action Game at the D.I.C.E. Awards and Best Game at this year's BAFTA Game Awards. 
• On August 17th, Vampire Survivors received a major update alongside its official Nintendo Switch release. The update introduced couch co-op for up to four players to play a single session simultaneously as well as other improvements like switching to a new engine for smoother performance on older hardware. 
• The game is perfectly at home on the Switch, having been a popular Steam Deck game given its relatively low graphical requirements and the ease with which its simple controls allow you to play it while doing something else, like casually watching Netflix. 
• Where the Switch version truly shines is in co-op. Given Nintendo’s console ships with two usable controllers via the Joy-Con, Vampire Survivors’ co-op mode is ready to go out of the box on Nintendo’s platform. You can watch a gameplay video of co-op here. 
• The mode introduces some novel constraints to the experience while also adjusting the difficulty and tossing in some interesting choices for you and other players to hash out, like the “friendship amulet” that makes your group choose between a random weapon upgrade or a definitive one.  

The Verdict: 

• Vampire Survivors is the rare indie game that warrants purchase on multiple platforms, even though there is currently no cross-save functionality (though that would be a much-welcome addition). 
• At just $5, the game costs considerably less than most major live service games’ standard cosmetic purchases, and it packs in dozens (if not hundreds) of hours of thoroughly enjoyable gameplay. 
• Even if you played it on Game Pass or own it on Steam, Vampire Survivors is worth buying again on the Switch if only to make it easier to enjoy the new co-op mode, which isn’t exclusive to the Switch, but is likely best enjoyed using Nintendo’s console unless you happen to own four Xbox controllers.
• Like the creator of Stardew Valley, developer Luca “Poncle” Galante didn’t set out to make a hit game, and he certainly has avoided any and all forms of monetization that could realistically transform it from a smash indie hit into a major moneymaker. 
• So while the game’s low price tag means it won’t be the most lucrative product, it does ensure Galante has the endless goodwill of players, not to mention likely millions of dollars in sales from the Steam version alone, in addition to advertising revenue from the free mobile version. 
• It’ll be fascinating to see what Galante goes on to create next, and whether it can have an impact as great as Vampire Survivors. 

Featured Jobs

• Dream Game Studios: Head of Product (Pune, India)
• Dream Game Studios: Head of Marketing (Pune, India)
• Dream Game Studios: Head of Game Production (Pune, India)
• Immutable: Business Development Manager (Remote)
• LILA Games: Backend Developer (Bangalore, India)
• Nexus: Head of Sales (Remote)

You can view our entire job board — all of the open roles, as well as the ability to post new roles — below. We've made the job board free for a limited period, so as to help the industry during this period of layoffs. Every job post garners ~50K impressions over the 45-day time period.