Microsoft and Nvidia Announce 10-Year Partnership to Assuage Regulators Over Activision Merger

Microsoft has struck a 10-year deal to bring Call of Duty and other Activision games to Nvidia's gaming platform if the Xbox maker is allowed to complete its much-contested $69 billion (about Rs. 5,71,468) acquisition of Activision.

Regulators and competitors like Sony have come out hard against the proposed Microsoft-Activision tie-up. The move may allay concerns by ensuring more ways for consumers to get games controlled by Microsoft, but regulators around the world have been sceptical about the acquisition.

Britain, earlier this month, said the deal could harm gamers by weakening the rivalry between Xbox and PlayStation, resulting in higher prices, fewer choices and less innovation for millions of players, as well as stifling competition in cloud gaming.

Microsoft President Brad Smith told a news conference on Tuesday he was now more optimistic about getting the Activision acquisition done after the Nvidia deal and a similar arrangement with Nintendo.

Phil Eisler, vice president and general manager of Nvidia's GeForce Now segment, said that titles such that Call of Duty will not be available on Nvidia's service unless Microsoft acquires Activision but that other Microsoft-owned titles such as Minecraft are covered immediately under the 10-year license agreement.

“We were a little concerned about it at the beginning,” Eisler said of the Microsoft-Activision deal. “But then we reached out to Microsoft, and they were very open about wanting to enable cloud gaming and work with us on a 10-year license agreement. So over time, they made us more and more comfortable with it.”

Eisler said Nvidia is not paying Microsoft for access to the titles, which is the same arrangement the company has with other gaming companies such as Fortnite maker Epic Games. Instead, Nvidia's 25 million customers will need to pay Nvidia for access to its cloud gaming platform and pay Microsoft for its games.

Shares of Microsoft fell 2 percent, Nvidia dropped 3.4 percent, and Activision fell 0.7 percent in a broadly lower market on Tuesday afternoon.

Nvidia said it now supports the Xbox maker's bid to purchase Activision, but the deal could still be a hard sell with regulators. European officials issued Microsoft a warning about the deal earlier this month, while the US Federal Trade Commission has asked a judge to block it. The British competition watchdog has said Microsoft may have to divest Call of Duty.

Smith said he hoped that rival Sony will consider doing the same type of deal with Nvidia.

Sony has led opposition to the Microsoft-Activision deal, saying last year it was “bad for competition, bad for the gaming industry, and bad for gamers themselves.”

Apart from Sony and Nvidia, other companies including Alphabet's Google had expressed concerns to the FTC about the deal, according to media reports.

Microsoft has pledged to keep Call of Duty on Sony's PlayStation. The popularity of the first-person shooter franchise is undimmed nearly two decades after launch, with the latest instalment achieving $1 billion in sales in its first 10 days in October.

The U.S. tech giant has said the deal is about more than Call of Duty. It has said buying the company that also makes Overwatch and Candy Crush would charge its growth in mobile, PC, and cloud gaming, as well as consoles, helping it compete with the likes of Tencent as well as Sony.

© Thomson Reuters 2023