Microsoft Deal Likely Closes in October as Ubisoft Acquires Streaming Rights to Activision Games

Microsoft announced that it will sell the global cloud streaming rights for all Activision Blizzard PC and console games, both library and future releases, to Ubisoft UBI for the next 15 years upon the acquisition of Activision. The rights will be exclusive globally outside the EU as a result of the previous cloud streaming deals made to satisfy EU regulators. The deal is yet another attempt, possibly the final one, to appease the U.K. authority, the last hurdle to closing the merger.

The U.K. regulator will reinvestigate the merger based on the new information with a deadline set for Oct. 18, the same date as the deal closing deadline, which was extended last month. We expect that the U.K. regulator will approve the merger as the two sides have held discussions over the last month about the situation and since future cloud competition was the primary stumbling block. We are maintaining our $95 fair value estimate for Activision Blizzard, equivalent to the merger consideration, as we expect the deal to close in October.

We are holding our Ubisoft fair value estimate at EUR 33 as we expect minimal total impact from the deal over the next few years. For the streaming rights, Ubisoft will make a one-time payment and compensate Microsoft via a market-based wholesale pricing structure. Some revenue will be generated by reselling the streaming rights to the games, but there is a limited market outside of Sony and Microsoft, which will have to purchase the rights in order to stream the games. As demonstrated by the lack of uptake for Amazon Luna or the now-shuttered Google Stadia, full-game streaming remains a small use case. Most of Xbox cloud gaming is done while waiting for the full game to background download, as disclosed during the U.S. Federal Trade Commission trial in July. Given this usage pattern, Microsoft may hold off on rebuying cloud rights for certain titles outside of the ones required to fulfill its previous commitments, like the EU deals.