Before we get to today’s topic—the political savvy of Microsoft executives—a quick postscript about yesterday’s Data Sheet on the Journalism Competition and Preservation Act.
Multiple reports emerged Tuesday morning that the JCPA, federal legislation designed to force Meta and Google into sharing ad revenue with publishers, would get attached to a must-pass defense spending bill this week. But when the bill became public Tuesday evening, the JCPA was not folded in.
Barring an unlikely last-minute change, this development essentially dooms the JCPA for now. There’s no clear path to passage in Congress’ lame duck session this month, and House Republicans are highly unlikely to bring it back once they retake control of the lower chamber in 2023.
So R.I.P. to the JCPA. Pour one out for the news industry, and score one for Meta and Google. Now, on to the rest of Data Sheet.
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Few tech giants move as shrewdly through the halls of political power as Microsoft.
Over the past few years, Microsoft executives have avoided the privacy, data-harvesting, and antitrust controversies enveloping the likes of Alphabet and Meta. They have curried favor with progressives by tolerating unionization within corporate ranks, in sharp contrast to Amazon. And they have rubbed shoulders with the necessary policymakers, accumulating well-earned political capital in the process.
“Two decades after fighting its own antitrust battles in Washington, Microsoft has emerged as a sophisticated and experienced Washington operator, positioning itself as a willing participant in regulation and developing relationships that engender rare trust,” the Washington Post declared earlier this year.
Now, Microsoft’s latest gambit only adds to its reputation.
Xbox chief Phil Spencer announced late Tuesday that Microsoft has reached an agreement with Nintendo to carry Call of Duty on the Japanese video game company’s Switch consoles for at least 10 years—provided that global regulators approve Microsoft’s planned $68.7 billion acquisition of Call of Duty developer Activision Blizzard. Spencer simultaneously confirmed Microsoft would continue to offer the franchise on the PC gaming distribution platform Steam.
The landmark Nintendo deal, terms of which were not disclosed, arrives at an all-too-perfect time for Microsoft in its quest to gain regulatory approval of the Activision Blizzard purchase.
The pact helps to undercut mounting complaints about the acquisition voiced by PlayStation parent Sony, which argues that Microsoft would be able to withhold titles like Call of Duty from rival platforms.
With the Nintendo tie-up, Microsoft is showing its similar offer to Sony—a 10-year commitment to keep Call of Duty available on PlayStation—isn’t just empty talk. In a Wall Street Journal op-ed published Monday, Microsoft president Brad Smith said cutting out Sony would be “economically irrational” given PlayStation’s position as a revenue driver for developers. Call of Duty generated more than $3 billion in net revenue in 2020, or roughly one-third of Activision Blizzard’s total sales, with a sizable chunk derived from PlayStation sales.
(Microsoft hasn’t disclosed terms of its offer, and Sony might have more to gain from trying to kill the acquisition than making nice with Xbox.)
More pressingly, the Nintendo deal gives Microsoft lawyers and executives more ammunition headed into discussions with the Federal Trade Commission, which is debating whether to try to block the acquisition on competition-related grounds. Microsoft officials are expected to make their closing arguments for the merger Wednesday in a meeting with FTC chair Lina Khan and some of the commission’s members, who will ultimately decide whether to contest the acquisition, the New York Post and Bloomberg reported.
While Khan swept into her regulatory role as a strong antitrust enforcer, pledging to rein in massive tech mergers, it’s far from certain that her agency will throw up a roadblock.
Politico reported in November that the FTC is likely to file an antitrust lawsuit aimed at blocking the acquisition, but the Post reported Sunday that FTC commissioners are split on the matter. If that’s the case, Washington insiders predicted Khan would seek concessions from Microsoft via a negotiated settlement, rather than spending political capital on fighting the acquisition.
Microsoft still faces multiple hurdles in its quest to acquire Activision Blizzard, including regulatory reviews in the U.K. and European Union. If the deal ultimately does fall through, it won’t be because company leaders played the political game poorly.
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Jacob Carpenter
