What the Microsoft-Activision mega deal means for Big Tech regulation

Yahoo Finance's Alexis Keenan discusses Microsoft and Activision Blizzard's $68.7 billion deal, which impacts Big Tech and popular gaming companies.

Video transcript

BRIAN SOZZI: Microsoft's nearly $70 billion deal for Activision Blizzard is far from signed, sealed, and delivered. Regulators could dig in their heels on the transaction, experts say. Yahoo! Finance's Legal Correspondent Alexis Keenan has been working on this one for us and joins us now. Alexis.

ALEXIS KEENAN: Hi, Brian. Yes, I've been talking with antitrust lawyers to try to understand if this [? mega-deal ?] is really destined for regulatory pushback, meaning, will the FTC or the DOJ-- whichever is eventually assigned to do the antitrust review in reviewing the deal. Will they file a suit to try to block it? And the short answer, really, is-- at least for US regulators-- is that they'll definitely take a really close look here and maybe even ask Microsoft for some concessions, but that, ultimately, this deal will stay mostly intact.

Now the antitrust lawyers they point to one major potential sticking point, despite that the deal is technically a vertical integration with Microsoft, primarily, in that gaming consoles with its Xbox business and also with Activision in the content business truly. So they caution that Microsoft could make its new acquired content from Activision exclusive to the Xbox. That's the main thing that these lawyers are looking for. They say that could trigger either an antitrust lawsuit or requirements from regulators to really limit the level of exclusivity that Microsoft and Xbox would have.

So let's take a look at the video game content that Microsoft is acquiring from Activision. You can see their six big names-- importantly, "Call of Duty." And then if you step back and take a look at what is NPD's list of top-selling video games, you start to see where the potential sticking points are here. This is from December of 2021. You can see there that Activision's in the number one spot with "Call of Duty."

And then among the companies that have both gaming consoles as well as content assets, you go down and you see there Microsoft, with owning Xbox, right behind Activision, with its number two game, "Halo." Then, further down the line, Nintendo, which, of course, has Nintendo Switch and it's [? still-popular ?] game, "Pokémon." And then you see Sony down below. Sony has PlayStation. They're further down the line there with Marvel's Spider-Man.

So there are, though, some other competition considerations, as well, that could become part of the regulators' review. Those could include looking separately at the gaming industry and breaking it down and saying, OK, what is this deal's impact going to be on mobile gaming versus console gaming? Those could be considered two separate industries. We still don't know how the regulators are going to define the markets. That's a huge point here.

Also, regulators could look at the deal's impact in the [? still-very-nascent ?] metaverse industry. Lawyers are saying that regulators could definitely step back and say, look, there's still an industry to be had here. What could we do to make sure that competition is fair in that soon-to-be-- or maybe it's already here in some people's minds-- in that industry.

So the timing of this should take about 6 to 18 months-- a wide span, of course, there. But overall, the review is not going to happen right away. It will take some time. And also, there are staffing shortfalls at the FTC that still have not been filled. So these regulators have a lot on their hands. Perhaps this one will go over to the DOJ this time.

BRIAN SOZZI: Alexis, the metaverse is here already. I [? can ?] confirm that. It is, in fact, here. Well, thank you for covering this for us, Alexis Keenan. We'll talk to you soon.