Sony Chief Downplays Concerns Over Microsoft’s Acquisition of Activision in FTC Trial

Title: Microsoft Downplays Cloud Gaming as “Stuttering… Tiny… Niche” in FTC Trial

Date: Jun 23, 2023

In a recent court hearing on the Federal Trade Commission’s (FTC) attempts to block Microsoft’s proposed acquisition of Activision, the tech giant has downplayed cloud gaming as a “stuttering… tiny… niche.” The revelation came as part of Microsoft’s opening statements, where the company also presented an email from Sony Interactive Entertainment President and CEO Jim Ryan, suggesting that Sony is less concerned about the acquisition than it publicly portrays.

According to the email read by Microsoft lawyer Beth Wilkinson, Ryan stated that Microsoft’s move to acquire Activision is not an exclusive play and that they are thinking bigger. Ryan expressed confidence that PlayStation will continue to have access to key multi-console franchises like Call of Duty for many years to come. While Ryan admitted that he would have preferred the acquisition not to happen, he reassured that Sony would be more than okay.

Microsoft seized the opportunity to highlight Ryan’s private email, claiming that it shows Sony has known all along that Microsoft will keep games on its platform. The company accused Sony of lobbying against the deal to protect its dominant position in the market.

This private email contradicts Sony’s public statements on the proposed acquisition. Sony has previously expressed concerns that Microsoft’s acquisition of Activision would give them too much power over PlayStation’s access to key franchises. Sony has also raised worries about receiving a “degraded” version of Call of Duty in terms of performance, price, or release date.

Sony’s refusal to sign a three-year Call of Duty sharing deal and subsequent 10-year deal offered to other platform holders has been seen by Activision CEO Bobby Kotick as an attempt to sabotage regulatory approval.

Microsoft’s Head of Gaming, Phil Spencer, has promised in interviews to release Call of Duty on PlayStation as long as there is a PlayStation console available. However, Sony has cited Bethesda’s post-acquisition Xbox exclusives as a reason for not trusting such promises. The FTC has also considered this pattern as “powerful evidence” against approving the deal.

In addition to the discussion on the Activision acquisition, Microsoft confirmed that Bethesda’s upcoming Indiana Jones game will be exclusive to Xbox and PC. However, in a document filed with the court, Microsoft stated that it expects many future ZeniMax titles to be shipped on PlayStation and Nintendo.

The same document also revealed Microsoft’s frank assessment of cloud gaming’s technical and market deficiencies. Despite years of development, Microsoft acknowledged that cloud gaming remains a niche market, making up only a tiny fraction of the billions of hours of gameplay each year. The company highlighted latency issues that can cause stuttering or lags in gameplay. Microsoft reported that a large majority of Xbox Cloud Gaming users rely on the service to try new games before deciding whether to download them natively for regular play.

Microsoft’s downplaying of cloud gaming’s importance could be crucial to its legal arguments, particularly after UK regulators cited cloud gaming market competition as a reason for blocking the proposed Activision purchase. This shift in perspective is notable considering the years of hype surrounding cloud gaming from various corners of the company.

As the FTC trial continues, the outcome of Microsoft’s proposed acquisition of Activision remains uncertain, with both companies presenting their arguments and evidence to support their positions.

How does Microsoft’s dismissal of cloud gaming as a “small market” impact the future of the gaming industry?

Microsoft Dismisses Cloud Gaming as “Small Market” in FTC Trial