Microsoft inked an Nvidia game deal to appease regulators over the Activision merger

BRUSSELS, Feb. 21 (Reuters) – Microsoft Corp. (MSFT.O) has inked 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 hotly contested $69 billion acquisition of Activision.

Regulators and competitors like Sony have been fiercely opposed to the proposed Microsoft-Activision tie-up, and the Nvidia deal could allay fears by ensuring more ways for consumers to control games with Microsoft.

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

Microsoft president Brad Smith said at a press conference on Tuesday that he’s now more optimistic about completing the acquisition of Activision following the Nvidia deal and a similar arrangement with Nintendo Co Ltd (7974.T).

Phil Eisler, vice president and general manager of Nvidia’s GeForce Now division, said titles such as “Call of Duty” will not be available on the Nvidia service unless Microsoft acquires Activision but other Microsoft-owned titles such as “Minecraft” are covered immediately under the agreement. The license is for 10 years.

“We were a little worried about it at first,” Isler 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 under a 10-year licensing agreement. Over time, they made us feel more comfortable with it.”

Nvidia does not pay Microsoft for access to titles, Isler said, which has been the chip company’s practice with other game companies like “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.

Microsoft shares were down 2.2%, Nvidia shares were down 2.8%, and Activision shares were down 0.6% in a broadly declining market Tuesday afternoon.

Nvidia said it now supports the Xbox maker’s offer to buy Activision, but the deal remains hard to sell with regulators. European officials issued Microsoft a warning about the deal earlier this month, while the US Federal Trade Commission asked a judge to block it. The UK’s competition watchdog has said that Microsoft may have to get rid of its “Call of Duty” software.

Smith said he hopes rival Sony Group Corp (6758.T) will consider striking the same type of deal with Nvidia.

Sony has led opposition to the Microsoft-Activision deal, saying last year that it was “bad for the competition, bad for the games industry, and bad for the gamers themselves.”

Aside from Sony and Nvidia, other companies including Alphabet Inc (GOOGL.O) Google have expressed concerns to the Federal Trade Commission about the deal, according to media reports.

Microsoft has vowed to keep “Call of Duty” on Sony’s PlayStation. The first-person shooter franchise’s popularity has not faltered nearly two decades after its release, with the latest installment bringing in $1 billion in sales in its first 10 days in October.

The US tech giant said the deal is about more than just Call of Duty. It said buying the company that also makes “Overwatch” and “Candy Crush” would charge it for its growth in mobile, PC and cloud gaming, as well as consoles, helping it compete with the likes of Tencent (0700.HK) as well. Sony.

(Reporting by Fu Yun-chi in Brussels and Stephen Nelis in San Francisco) Editing by Peter Henderson and Matthew Lewis

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