Microsoft’s legal clash with the FTC reached another milestone after both sides presented their closing arguments in front of a San Francisco federal court on June 29. And as the embattled parties are now waiting for a verdict on theFTC’s attempt at temporarily blocking Microsoft’s Activision Blizzard acquisition, this would be a good time to go over the biggest bombshells stemming from the case, of which there were many.
All revelations resulting from the June proceedings came in the form of either witness testimonies or confidential documents unsealed at the discretion of District Judge Jacqueline Scott Corley. Many of those revolved aroundCall of Duty, Activision’s flagship franchise that the FTC believes could tip the scales ofthe console wars that Microsoft claimed Xbox lostin the run-up to the trial.
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Call of Duty Bombshells From FTC v. Microsoft Case
WhileCall of Duty’simmense worth to PlayStationwas never in doubt, one poorly redacted document that was unsealed during the trial attached an actual figure to its impact on Sony’s bottom line; according to that filing, Sony took a $1.5 billion cut fromCall of Dutysales on PlayStation consoles in 2021 alone, with over half of that figure coming from U.S. gamers.
Another court exhibit gave away thatSony’sCall of Dutydeal with Activision only includes one more gameand will effectively end in late 2023. This was significant because that agreement was previously said to run until 2024, with the implication being it would include at least two more titles. And while Microsoft publicly proposed a ten-year extension to Sony, an email between Xbox Head Phil Spencer and SIE CEO Jim Ryan that surfaced during the trial revealed that the company wasn’t as generous from the get-go; Spencer originally offered a five-year commitment, which Ryan rejected as a band-aid solution that fails to address Sony’s wider concerns about the deal.
The talks between the two broke down soon afterward, but the gamble ostensibly paid off for Sony, asSpencer swore an oath to indefinitely keepCall of Dutyon PlayStationten months later, during the second day of the ongoing trial. Irrespective of that commitment, the FTC posited it doesn’t trust Microsoft to act in good faith, pointing to its 2021 acquisition of ZeniMax Media as an indicator of what kind of fate awaits Activision Blizzard’s game library should Microsoft acquire theCall of Dutymaker.
Bethesda Bombshells from FTC v. Microsoft Case
That line of reasoning resulted in the revelation thatBethesda’sIndiana Jonesgame was going to be multi-platform before the Xbox acquisition. In fact, the trial brought to light that Bethesda had more PlayStation- than Xbox-related plans before Microsoft absorbed its parent company.
The imbalance was apparently so concerning thatSpencer admitted Xbox was worried about losingStarfieldto PlayStation, citing that as one of the deciding factors that made it pull the trigger on the ZeniMax acquisition. Following that move, Microsoft canceled the PlayStation versions of all of Bethesda’s upcoming games that weren’t tied to pre-existing exclusivity agreements with Sony.
When the company detailed an entirely opposite strategy for Activision Blizzard’s game library less than a year later, both the FTC and Sony were skeptical about that commitment. But it turns outeven Bethesda was concerned about Microsoft’s promiseto keepCall of Dutyon PlayStation, as its Marketing SVP Pete Hines asked Spencer for clarification on how and why the two acquisitions differ so much.
While responding to a similar question during his hearing testimony, Spencer said that platform exclusivity decisions are made on a case-by-case basis at Microsoft, concluding there’s no discrepancy between the company’s management of ZeniMax and its plans for Activision Blizzard’s portfolio. As part of train of thought, theXbox boss even gave a clue on whenThe Elder Scrolls 6will release, indicating that Bethesda’s upcoming RPG will likely be a cross- or next-gen title. Specifically, it is said to be “5+ years away.”
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Console Bombshells from FTC v. Microsoft Case
Speaking of the tenth console generation, another court document that surfaced ahead of the trial revealed thatMicrosoft expects PlayStation 6 and the next Xbox to launch in 2028. As for the hardware that’s already on the horizon, the tech giant told the FTC it’s certain that Sony’s Project Q handheld will have a sub-$300 price tag in the run-up to their court clash.
The trial also confirmed thatSony intends to keep Activision out of the PlayStation 6 loopshould Microsoft manage to acquire theCall of Dutymaker. Jim Ryan said as much to the FTC, arguing that Sony simply couldn’t risk sharing its future hardware with its fiercest rival’s subsidiary. And while that position was hardly surprising, its underlying reasoning led to the revelation that Activision helped Sony with PlayStation hardware development in the past, though the specifics of their collaboration were redacted out of Ryan’s statement.
Game and Exclusivity Bombshells from FTC v. Microsoft Case
Meanwhile, a lot of information pertaining to unannounced games managed to slip through the cracks as part of the proceedings. Somecourt documents hence leaked the existence ofDayZ 2, in addition to suggesting that IO’sProject Fantasywill be an Xbox console exclusive. On the other hand, Obsidian’sThe Outer Worlds 2that was widely expected not to launch on PlayStation could still do so, with Xbox Game Studios Head Matt Booty testifying that Microsoft hasn’t yet made a decision on the RPG’s target platforms.
EvenMicrosoft CEO Satya Nadella weighed in on the subject of console exclusivityduring the case by stating that he would “love” to eliminate it entirely on the fourth day of the hearing. “I have no love for that world,” he said, while also arguing Microsoft is the least responsible for their prevalence out of all the console manufacturers because it has a much smaller market share than Sony and Nintendo.
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Acquisition Bombshells from FTC v. Microsoft Case
And while the Xbox maker argues that the Activision Blizzard acquisition will merely help it close that gap with its rivals, the trial also saw its counsel reiterate how the deal is primarily mobile-motivated. That strategy didn’t develop overnight, as evidenced by a May 2021 corporate presentation revealing thatMicrosoft recently considered buying Sega and Bungie, as well as over a dozen other companies.
The tech giant subsequently decided that its next blockbuster acquisition should have a strong mobile presence because that’s where its own portfolio is lacking the most. Many of its past targets like Bohemia Interactive and Square Enix were hence quickly abandoned, but the one that wasn’t was Zynga; during his cross-examination on June 23, Spencer revealed thatMicrosoft tried buying Zyngamere months before Take-Two Interactive did so in early 2022. But theGTApublisher didn’t beat it to the punch, with Spencer testifying that the company abandoned the idea on its own after deciding Zynga wasn’t big enough for its mobile ambitions.
This finally made Microsoft set its sights on Activision Blizzard, the owner ofCandy Crushmaker King. The strength of ABK’s mobile business left the tech giant’s executives absolutely baffled while performing their due diligence into the acquisition; Spencer specifically pointed to the fact that 30% of Activision’s $453 million turnover in Q1 2022 came fromCall of DutyMobileas a “wow” realization in an email to Head of Xbox Creator Experience Sarah Bond that showed up in court.
And while Sony has publicly focused its concerns about the deal onCall of Duty’s PlayStation future, its private communications that surfaced during the trial told a completely different story. Namely, former Sony Computer Entertainment CEO Chris Deering immediately identified the deal as a mobile play in an email to Jim Ryan. Elaborating on that point, Deering said thatMicrosoftcould have secured Xbox exclusivity for the next threeCall of Dutygames for “maybe £5 billion” ($6.32 billion) if it actually cared about console exclusivity.
Reflecting on the overall value of the investment, Deering joked how Microsoft would’ve been better off “announcing a new electric car” than buying Activision Blizzard. Ryan seemingly agreed with the overall sentiment, writing that PlayStation will be “more than OK” in his January 2022 response to Deering, mere months before Sony started campaigning against theMicrosoftacquisition.
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