It is Day 4 and Day 5 of the hearing of the FTC requesting a Preliminary Injunction against Microsoft to avoid closing the transaction where they will welcome the Activision Blizzard conglomerate as a new family member of Xbox Game Studios.
On Day 4 this past Wednesday, it was a big day as both CEO of Microsoft and Activision Blizzard, respectively Satya Nadella and Bobby Kotick will have their turn to speak.
Bobby Kotick took the first turn where Microsoft's legal team had him describing in a short version the history of Activision when it was founded and first businesses in the early 90’s to what it is today.
The main point was entering 2010 and 2011, where the mobile gaming took a big footprint in the gaming market in general and at the same time, Call Of Duty was already beginning to rise on a must-have game status, including its early history that Activision was on competition with Electronic Arts in the first-person shooter world and had onboard the original Medal Of Honor team after being let go from EA.
The important main acknowledgement is that Call Of Duty was always multiplatform and just because Activision Blizzard wants to be owned by Microsoft will not change the fact and WAS NEVER ON PLANS OR DISCUSSIONS, even today.
Talking directly on numbers, Call Of Duty on Playstation revenues are twice the Xbox revenues and basically Playstation benefits from Sony's business strengths as Sony is an electronic conglomerate of electronics itself and allows them to have huge market share, including the entertainment side of things with Columbia Pictures and Sony Pictures.
In a direct jab against Sony, Bobby Kotick answered with yes when he was asked if he believes that Sony could have Playstation answer this buyout, acknowledging Playstation Studios and their talent.
Preventing a questioning of this kind, Microsoft legal team asked Bobby Kotick if it is suitable to have “degraded versions” of game for any target platform and Kotick disregard that as a good idea and when exclusive DLCs were mentioned, he believes that Playstation had more exclusive DLCs than Xbox.
Interestingly, Judge Corley asked Kotick why some people prefer to pay $15 a month to play World Of Warcraft instead of a single payment of $70 for a full game. Kotick acknowledged that there are specific cases like WoW, there aren’t many examples of games for which that model works.
Bobby Kotick went to the point saying that Call Of Duty was not designed and it is not in his interest that it goes to subscription nor Cud Gaming platform and that will remain if the transaction fails and also, PS Plus Extra/Premium will never receive Call Of Duty.
Kotick also doesn’t believe in the Game Pass and questioned on why Activision Blizzard agreed with a company that is pushing gaming subscription, Kotick acknowledged that despite the fact there is a sale agreement, both Microsoft and Activision can still disagree in opinions, but will not interfere if Microsoft decides to change things (and probably can’t even if he want to stop if the transaction closes).
When the turn came for the FFTC, practically the line of questioning was to attack Bobby Kotick to say that Activision Blizzard purchase was indeed about Call Of Duty and not the mobile gaming studios led by King.
Pretty much like this past Friday, Bobby Kotick under oath claimed that Call OF Duty will be multiplatform and includes Playstation.
It was clear that FTC wanted Bobby Kotick to make inconsistency with all that had been said on record but it is evident that Kotick was well prepared for FTC counter-questioning.
Returning in mobile gaming topics, FTC brought up Activsiojn and chinese Tencent Games relationship, including about Tencent making CoD Mobile for Activision in which Bobby Kotick points out how big Tencent is and that it would have been difficult for them to actually develop Call Of Duty Mobile at the same time, their main console/PC Call Of Duty games.
And of course, a new day, a new attempt on having the Nintendo Switch serving against Microsoft and Activision as FTC wanted to pressure Bobby Kotick to acknowledge that Call Of Duty cannot be optimized for Nintendo’s current hardware which is pathetic at this point in my opinion.
A new strategy with the Nintendo narrative is that Microsoft “recklessly” compromised with Nintendo regarding Call Of Duty and Activision wasn’t really behind the idea, but remember, Kotcik said that Microsoft can decide whatever they want, he is operating with both scenarios, where the deal can close and where the deal fails.
And meanwhile there has been talk that Nintendo is preparing for a 2024 new hardware announcement, Kotick said that Activision has been interested on early details they have heard and did said that he regretted underestimating the Nintendo Switch back in the day and nowadays respect it as a close thing to Xbox and Playstation.
End Kotick Enters Dr. Elizabeth Bailey
After Kotick, it was once again the turn of Dr. Elizabeth Bailey, an economics expert at Charles River Associates, testified again and her turn started with the judge trying to benchmark DR. Robin Lee, the economic expert that FTC brought as their witness.
Dr. Bailey says she has analyzed data of the 10-week period that the Switch launched. She found a decline in the number of gamers on Xbox and PlayStation consoles and game time hours.
The FTC and Microsoft argue about the Switch every day because the FTC doesn’t want to count the Switch as a competitor to Xbox, but Microsoft argues it is. Dr. Bailey’s analysis shows that the Switch has an effect on gamer attention and where they spend their hours.
If Switch is included in the global console market, Dr. Bailey says “no matter which metric we use, Xbox is the third place” and has been for the last five years.
An observation by Dr. Bailey says that her data suggests it’s where gamers spend their time that matters, not the hardware.
The FTC doesn’t count PCs into the console market, but Microsoft is trying to point out here that they still compete because they both largely play the same games, especially an Xbox and specifically, The Competition and Markets Authority (CMA) in the UK appears to have counted all Game Pass users as cloud users which makes the whole narrative of the CMA wrong.
A botched thing from a court Intern or a shameful oops FROM BOTH?
Many observers were noticing during the day that FTC filings with “redacted” things from Sony were actually so badly redacted that people actually could tell within the pen or cheap paper marker and supposedly non-public information became public much without Sony could do about it before the FTC retired the electronically submitted documentation.
This document revealed that:
- Horizon Forbidden West apparently cost $212 million over five years with 300 employees
- 1 million gamers play nothing but Call of Duty and the franchise means $15.9 billion per year
- Sony says only one more Call of Duty game was guaranteed to come to PlayStation
Last point is a surprise as I thought that 2024 Call Of Duty was the last game under the current “Playstation as a platform focus” agreement and its appear that the deal goes with 2023 Call Of Duty game (supposedly to be a massive expansion of Modern Warfare II Remake or a REmake of Modern Warfare 3).
It was also revealed yesterday that the filling that showed Xbox buying spree plans that included retaking Bungie and Sega, was supposed to be redacted also and not visible.
Nvidia is up with positivism on Xbox live to Cloud Gaming
Nvidia had Jeff Fished making a video recorded deposition in which he acknowledged that Nviida was part of the Activision Blizzard acquisition until Microsoft decided to include GeForce Now, their Cloud Gaming service, included on the roadmap if allowed to complete the acquisition.
REgarding the discussions that Nvidia held a few months ago with the CMA, Fisher says GeForce Now doesn’t cannibalize the existing games market — users typically use “lower-end and incompatible systems” to access games as a explanation why he does believe PC gaming is better than console and Cloud Gaming is a great expansion.
The FTC asks if Nvidia cloud gaming offers a “superior” experience to Xbox — Fisher says it’s “similar to or better than” the Xbox experience.
Enters Satya Nadella
Microsoft CEO Satya Nadella took its turn and FTC began questioning about Microsoft on gaming as a revenue source and quoting him on a Q3 2022 report that Xbox was market leader among newest-generation consoles in U.S. and some other Western markets by the time of that report and in Q4, Xbox was already market share leader in North America for 3 quarters in a row.
This scenario, the FTC is trying to say that Microsoft is not really needing Activision Blizzard to compete better, but to actually be a giant and keep being a leader.
Sastya Nadella did recognize that the metrics were on par with expectations, but it was met because they set goals low for Xbox and Microsoft Gaming.
Even with that, Nadella did not deny that both Xbox Series S and X were meeting metrics US, Canada, UK, and Western Europe, again, in a line of questioning that FTC will make the acquisition look like an elitist buy and not for a real need.
When Cloud Gaming was introduced on metrics, Satya Nadella confirms and explains the fact that cloud gaming is "integral to the experience", it's not streaming alone, but also Xbox Live.
FTC continue pushing with more internal emails, including making Pihl Spencer more focus on the Xbox Cloud Gaming ecosystem and working with Meta on the Quest Pro launched a few months ago, including bringing tools like Microsoft Teams for the VR headsets and I don’t get what this in particular is relevant, but Nadella asserted that he wants Microsoft as a whole Cloud and software first.
Satya Nadella says he’d “love” to get rid of console game exclusives but blames Sony for defining the market and competition. Nadella made the comments as part of testimony in FTC v. Microsoft today, discussing Microsoft’s cloud gaming strategy, internal gaming targets, and much more.
Microsoft CFO turn
And the final act of the day had Microsoft CFO Amy Hood and the topic of Call Of Duty was the first thing to be brought up and declared that Call Of Duty is not the focus of the Activision Blizzard acquisition, and to her knowledge it was not discussed internally, not to her and believes that the Acquisition’s strategic rationale and financial valuation are both aligned toward making Activision games more widely available, not less.
Hood did acknowledge that Activision Blizzard, as an Xbox Game Studios member, is expected to drive revenue for Microsoft Gaming.
The last dance of the Preliminary Injunction against Activision Blizzard acquisition
As Judge Jacqueline Scott Corley wishes, this past Thursday was the last day we hear both Microsoft justifying buying Activision Blizzard and how FTc believes that this goes against gamers best interest and CMA got a botched attempt during the day too.
And the final day began with Xbox CFO Tim Stuart, instead of continuing with Microsoft CFO.
Tim Stuart confirmed a evidence by the FTC that the Activision Blizzard acquisition was known internally as Project Denali and then, FTC continues to pressing on to have a narrative in the Call Of Duty as a hidden reason to buy the gaming conglomerate ion which Stuarts replies that while the 10-year deals that were given to most of gaming competitors including Nintendo are the best to maintain a healthy competition, Microsoft has yet to do a financial analysis while meeting the agreements.
FTC demanded to see Japanese data regarding the competition of Xbox against Nintendo Switch and Playstation, to which Stuart replied that Japanese data is unreliable.
Xbox is known to have always been at third place traditionally in Japan as Microsoft has failed to appeal to japanese gamers.
CMA newest botched attempt
While Xbox CFO was deposing, in the UK,the CMA tried to have the CAT consider delaying their next hearing in OctoberThe Competition Appeal Tribunal (CAT) immediately responded with a no, so the hearing will continue on July 28th. The CMA was trying to push it all the way back to October, and the CAT ruled this would be “contrary to justice and fairness.”
Many are really curious about the timing of this filling, but it is obvious that CMA sees the FTC losing this hearing and they are trying to buy some time because it is up to them to stop the acquisition.
Back at the Nintendo narrative but with Nintendo deposing
Via a pre-recorded deposition, Steve Singer, SVP of developer relations at Nintendo reveals sensitive information that the Judge Coprley decided not to be public.
FTC have been trying to look as Nintendo is no consecuencial in the gaming market to damage all the notion that Xbox is at 3rd place which, is entirely true in terms of sales, Nintendo was kicking both Playstation and Xbox collective asses for a time during the heydays of the Nintendo Switch.
Back at Xbox CFO, FTC wanted Stuart to explain what he meant about “dump money”, which is an inside way of referring to a friend.
In some inside information, Game Pass prices against PS Plus tiers were discussed and obviously not many could really interpret as the information needed to be seen and apparently will not be made public.
That brought the topic of Xbox price changes based on a September 16th, 2020 email between Tim Stuart, Amy Hood, Phil Spencer, Satya Nadella, and Jerret West, CMO at Xbox.
Stuart is updating the team about how the Xbox Series S pricing compares to the PS5 on the day of Sony’s pricing announcement. The information the FTC is pointing to in this email is redacted, so it’s not clear what pricing was discussed.
Another email two years later in 2022 is references where Spencer is updating the team about pricing moves from Sony. Stuart was discussing foreign exchange rates and probably discussing a price hike, which Microsoft eventually announced last week.
The FTC and Tim Stuart are now discussing financial models for the Bethesda acquisition and Activision Blizzard. For both, Tim Stuart assumed no major changes in platform strategy.
The model for the Bethesda deal assumed there would be “non-Xbox platform revenue.” The FTC lawyer then says Activation required a financial revision, but Stuart doesn’t remember. The FTC brings up an updated forecast from Activision in January 2022, arguing it’s not a small revision. Not clear what triggered the updated forecast, but perhaps a game cancellation or delay. Stuart says it’s “relatively small” in the grand scheme of a 10-year model.
Stuart got pressed about Bethesda's performance as a Xbox Game Studios and the exclusive narrative and FTC went over a meeting in 2020 with an investment firm where he reiterates that Xbox was looking for Bethesda games to be available in other platforms in the future.
And then the Resolution aspect of the game like in the case of Starfield was brought up and this was an intention to give validity to the Call Of Duty dregrated for Playstation with ACtivisionstudios under Xbox.
The FTC has just presented an email between Xbox CFO Tim Stuart and Xbox chief Phil Spencer, where Spencer says Stuart’s investor talk about Bethesda “sure did stir up a lot of stuff. Stuart responds:
“Wish we could come out and say we’re taking [Bethesda content] all exclusive at this point.”
Another email between Stuart and Matty Booty, Xbox Game Studios chief, discusses making Bethesda’s games exclusives and the financial tradeoffs and concerns about valuation. The email mentions Xbox Game Pass subscriber growth, Xbox units, and offsetting these against the losses of taking games exclusively.
The FTC wants to make it clear that Microsoft would be willing to take a financial hit to boost Xbox Game Pass subscriber growth, sell more consoles, and ultimately bring more consumers to its Xbox platform.
Stuart at his final stretch of his turn in stand, discussed the five strategy scenarios that Microsoft was weighing up for Bethesda in February 2021, just ahead of the deal closing. They range from number one being fully cross-platform and number five being full Xbox exclusivity.
Full exclusivity would impact the deal valuation and when discussing these options Jerret West, Xbox CMO, said there would be “significant upset” to full exclusivity and there’s an admission that some leaders at Bethesda won’t be happy seeing games being cut from PlayStation.
The FTC is clearly trying to show that Microsoft’s deal models are flexible where they can potentially offset losses.
I guess a “win” for the FTC and this is not news, is that Microsoft by 2021 is inclined to go for more exclusive with Bethesda, but FTC wanted to look like Microsoft went against what was approved to have then by ZeniMax.
The FTC is trying to establish whether Microsoft’s different deal models could affect their console market share, so an incentive to close off games to competitors. Xbox CFO Tim Stuart is quizzed on if Microsoft’s deal models include whether Xbox console sales would increase.
Message form Canada
During Staurt deposition, Canada’s Competition Bureau has written to Judge Corley to correct “factual inaccuracies” in the Microsoft / Activision court filings.
Microsoft had claimed three things its filings:
1 - Every single worldwide regulator that has examined the deal other than the FTC has rejected this theory [that Xbox will take COD away from PlayStation]
2 - As a result of these efforts, all but one foreign regulator to pass on the issue [cloud gaming] has cleared the transaction. The lone exception is the United Kingdom’s CMA.
3 - Ultimately, Lee’s analysis provides no basis to disregard the real world, where Sony has a favorable offer for COD, Xbox has made plain that it wants to provide COD to Sony (and in fact needs to continue to sell to Sony), and regulators around the world all agree that withholding COD from Sony would be unprofitable and is thus not a serious concern.
Canada’s regulator says:
“Contrary to the foregoing quotations from the Memorandum, in a videoconference on May 5, 2023, the Bureau communicated to Microsoft and Activision’s Canadian counsel that the Bureau has concluded that the proposed merger is likely to result in a substantial prevention and/or lessening of competition with respect to gaming consoles and multigame subscription services (as well as cloud gaming), and that the Bureau is continuing to monitor the transaction”
The remainder of Tim Stuart deposition included if Microsoft has a Xbox Game Pass strategy tiers further as it already is, the Xbox mobile store gets a mention which will be the main project of Xbox after the acquisition, Microsoft has been contemplating the financial gaps of Xbox exclusivity.
Additionally, the FTC accidentally lets slip that Xbox Game Pass would need to grow by 2 million subs a year to help offset Call of Duty exclusivity, how the Nintendo Switch impacted Xbox Series S pricing and finally Minecraft as a “significant” revenue driver for Microsoft, but not thanks to Xbox.
Right afterwards it was the closing arguments and it was an extensive one but basically, it is a summary of all the past days of discussion and bringing back topic but, a main highlight is that judge Corley made FTC admit that they are using Sony as a party being affected and while this is about “consumer being harmed”, Sony acts the same way.
I can simply sum that the FTC went ahead with almost the same strategy as the CMA with a dire situation on both Cloud Gaming emerging market and playing as Playstation as being “unfairly” trying to get it under and that instead of a mobile Xbox footprint in the making, this is just about Call Of Duty.
The hearing was damaging for Playstation in that Sony is trying to portray that going against Playstation is the exact thing as going against the gaming market and hell sure, Nintendo ain’t happy about how both FTC and Sony minimized their effort and success with the Nintendo Switch.