Microsoft (MSFT Quick QuoteMSFT - Free Report) has received approval from The European Union for its $69-billion acquisition of Call of Duty-maker Activision Blizzard . This decision goes against the U.K. and U.S. authorities, who have concerns about the deal.

The European Commission, after conducting its analysis, concluded that the acquisition would not harm competition. Microsoft made a promise to allow other companies in the cloud gaming market to offer popular games like Call of Duty on their platforms for the next ten years. However, the deal still faces legal challenges in the United States and the U.K., which could be difficult for Microsoft to overcome.
    
The EU's decision is seen as positive for competition and is expected to give a boost to the cloud streaming market, which currently makes up a small percentage of the overall gaming industry.

The EU's viewpoint contrasts with that of the U.K.'s Competition and Markets Authority and the US Federal Trade Commission, both of which had reservations about the deal. The main difference in opinions seems to revolve around how quickly the cloud gaming market will grow in the future.

Overall, Microsoft's acquisition of Activision Blizzard has received EU approval but the deal's ultimate success depends on overcoming legal hurdles in the United States and the U.K. The decision by the EU shows confidence in the potential benefits of competition and growth of the cloud gaming market.

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What is The Problem With The Acquisition?

The main problem with the acquisition is regarding the competition. Microsoft’s gaming division would have too much of the industry, which could unfairly limit its competitors and ultimately harm consumers.

In the United States, the Federal Trade Commission (FTC) wants to stop Microsoft from buying Activision, as they believe it could have negative effects. The U.K.'s Competition and Markets Authority (CMA) is also concerned that the deal could lead to higher prices and fewer options for gamers in the U.K.

The CMA has issues with the solutions Microsoft proposed to address these concerns. The problem revolves around exclusivity – if Microsoft wants to benefit the most from the deal, they might make future games from Activision exclusive to Xbox and PC, leaving out Sony’s (SONY Quick QuoteSONY - Free Report) PlayStation.

Since Microsoft acquired Minecraft in 2014, the game has been available on platforms owned by Sony and Nintendo (NTDOY Quick QuoteNTDOY - Free Report) without any restrictions. As part of the ongoing discussions surrounding the Activision deal, Microsoft has made a commitment to keep Call of Duty, which has been a major point of contention, accessible on Sony and Nintendo platforms for ten years following the completion of the acquisition.

Although the deal is approved by the EU, it may not go through. The U.K.’s Competition and Markets Authority (CMA) had a dissenting opinion last month. CMA had cited cloud gaming market as a concern, which is now agreed by Microsoft. This could make the difference in CMA’s decision.

Microsoft’s Gaming Prospects to Get a Boost

This Zacks Rank #3 (Hold) company is building an Xbox mobile store, which will offer games directly to mobile devices. Microsoft wants to add Activision Blizzard content to this store to build on its already existing communities of gamers.

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For fiscal fourth-quarter Microsoft expects Xbox content and services revenue growth in the low to mid-teens due to third-party and first-party content, as well as Xbox Game Pass.

Microsoft’s shares have gained 30.6% year to date, whereas the Zacks Computer and Technology sector have grown 22.7%.