Microsoft inks Nvidia gaming deal to appease regulators over Activision merger

BRUSSELS, Feb 21 (Reuters) – Microsoft Corp ( MSFT.O ) has struck a 10-year deal to bring “Call of Duty” and other Activision ( ATVI.O ) games to Nvidia Corp’s ( NVDA.O ) gaming platform if the Xbox maker is allowed to complete its much-contested acquisition of Activision for $69 billion.

Regulators and competitors such as Sony have come out hard against the proposed Microsoft-Activision merger. The move could ease concerns by ensuring more ways for consumers to get games controlled by Microsoft, but regulators around the world have been skeptical of the acquisition.

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

Microsoft President Brad Smith told a news conference on Tuesday that he was now more optimistic about getting the Activision acquisition done after the Nvidia deal and a similar arrangement with Nintendo Co Ltd ( 7974.T ).

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Phil Eisler, vice president and general manager of Nvidia’s GeForce Now segment, said titles like “Call of Duty” won’t be available on Nvidia’s service unless Microsoft buys Activision, but that other Microsoft-owned titles like “Minecraft” are immediately covered under the 10-year license agreement.

“We were a little worried about it at first,” 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 that.”

Eisler said Nvidia does not pay Microsoft for access to the titles, which is the same arrangement the company has with other game companies such as “Fortnite” maker Epic Games. Instead, Nvidia’s 25 million customers must pay Nvidia for access to its cloud gaming platform and pay Microsoft for its games.

Shares of Microsoft fell 2%, Nvidia fell 3.4% and Activision fell 0.7% in a largely lower market Tuesday afternoon.

Nvidia said it now supports the Xbox maker’s bid to buy Activision, but the deal could still be a tough sell with regulators. European officials gave 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 that Microsoft may have to sell “Call of Duty”.

Smith said he hoped rival Sony Group Corp ( 6758.T ) would consider doing the same kind of deal with Nvidia.

Sony has led the opposition to the Microsoft-Activision deal, saying last year that 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 ( GOOGL.O ) Google had expressed concerns to the FTC about the deal, according to media reports.

Microsoft has promised to keep “Call of Duty” on Sony’s PlayStation. The popularity of the first-person shooter series is undiminished nearly two decades after its launch, with the latest installment achieving $1 billion in sales in its first 10 days in October.

The American technology giant has said that the agreement is about more than “Call of Duty”. It has said that buying the company that also makes “Overwatch” and “Candy Crush” would fuel growth in mobile, PC and cloud gaming, as well as consoles, and help it compete with the likes of Tencent ( 0700.HK ) also which Sony.

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

Our standards: Thomson Reuters Trust Principles.

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