What you need to know
- Microsoft is currently in the middle of a hearing with the FTC regarding the proposed acquisition of Activision Blizzard.
- The injunction hearing has provided testimonies from Phil Spencer, Sarah Bond, and other Xbox leaders and pertinent information regarding the business deal.
- An internal email from Microsoft shows that Microsoft was willing to “go spend Sony out of business” to boost Xbox Game Pass.
Microsoft’s planned acquisition of Activision Blizzard stands as the largest propounded in the history of the video games industry. Unfortunately for the tech company, its magnitude has brought mountains of scrutiny from regulatory bodies around the world. One of the most skeptical of these groups is the Federal Trade Commission of the United States of America. Last week kicked off a preliminary injunction hearing between Microsoft and the FTC to decide the near-term fate of the acquisition.
From Xbox’s standing in the console wars to the lowkey confirmation of major first-party exclusives, the ongoing legal showdown has delivered huge revelations about the inner workings of Xbox and PlayStation. A particularly fascinating piece of evidence in the hearing involves a 2019 email exchange between Matt Booty, the Head of Xbox Game Studios, and Xbox CFO Tim Stuart about how the company can compete against PlayStation through aggressive Xbox Game Pass acquisitions. According to Matty Booty, Microsoft was “in a very unique position to be able go spend Sony out of business.”
The email demonstrates Xbox’s approach to guaranteeing Xbox Game Pass content and how the resources provided by Microsoft make it exceedingly difficult for companies to compete on the same level. The email goes on to state that “it is practically impossible for anyone to start a new video streaming service at scale at this point.” It even suggests that when it comes to Xbox Game Pass and game streaming, “Sony is really the only other player who could compete.”
While a bulk of this email thread was redacted in the courtroom, a comment from Matty Booty near the end of the email implies there were discussions to potentially walk back the day and date promise of first-party Xbox Game Pass releases. Booty stated, “If we reverse course on day and date, it’s going to be hard to convince folks that things like Mixer or Xcloud have much of a chance of surviving scrutiny either.”
Update - Microsoft has provided an official statement on the email exchange:
“This email is three and a half years old and predates the announcement of our acquisition by 25 months. It refers to industry trends we never pursued and is unrelated to the acquisition.”
A Microsoft spokesperson
Analysis: Thought experiment, or aggressive intent?
Microsoft has largely fielded questions from the FTC with tact and grace. Bringing executives like Phil Spencer, Sarah Bond, and Pete Hines on the stand has demonstrated confidence in the company’s legal right to purchase Activision Blizzard. The Xbox team has clearly messaged the acquisition’s benefit to consumers, especially when it comes to the value of Xbox Game Pass and how the company continues to meet players where they already are.
Unfortunately, the email’s aggressive wording surrounding acquisitions and the plans to essentially buy the most substantial competition out of the market don't align with the current messaging and strategy. Microsoft's statement also provides important context on the exchange and how the timing relates to the Activision Blizzard acquisition. There are still several more days of deliberation coming this week, and considering the rapid pace of enormous news stories from the first two days, there’s plenty to uncover in the showdown between Microsoft and the FTC.
