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Microsoft inks Nvidia game deal to assuage regulators over Activision merger

[February 22, 2023] By Foo Yun Chee and Stephen Nellis

BRUSSELS (Reuters) -Microsoft Corp has struck a 10-year deal to bring "Call of Duty" and other Activision games to Nvidia Corp's gaming platform if the Xbox maker is allowed to complete its much-contested $69 billion 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 skeptical 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 of getting the Activision acquisition done after the Nvidia deal and a similar arrangement with Nintendo Co Ltd.

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%, Nvidia dropped 3.4% and Activision fell 0.7% in a broadly lower market on Tuesday afternoon.

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President of Microsoft Brad Smith reacts during an interview with Reuters at the Web Summit, Europe's largest technology conference, in Lisbon, Portugal, November 3, 2021. REUTERS/Pedro Nunes/File Photo

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 U.S. 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 Group Corp 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 Inc'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 installment achieving $1 billion 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.

(Reporting by Foo Yun Chee in Brussels and Stephen Nellis in San Francisco; Editing by Peter Henderson, Matthew Lewis and Bradley Perrett)

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