Microsoft acquired Activision Blizzard King for $69 Billion on 2023-10-13

[Nesh]

This has no relevance, though. Sony is a competitor, and it isn't the FTC's charge to protect a competitor, it's to protect the consumer. Sony or anyone else can cooperate all they want, but what they have to prove is that the merger is going to harm the consumer. So far the FTC has fixated on harm to Sony.

The argument though is how harming competition, has trickle down effects to the consumer. So Sony or any other potential competitor is indeed related. Although I am confused why FTC insists on using COD as an argumemt and not the fact that MS has bought off a humangous amount of multiplatform IPs, some of the biggest multipltaform studios and publishers in the industry, and how MS's internal emails show a hidden aggressive strategy to eliminate competition.

 

[Silenti]

A quick point. The reason the FTC has made this about Sony is because that is how the FTC has chosen to define the market in their argument. Their argument hinges on the likes of PC, Nintendo, etcetera, being a separate market. Only Sony makes the other "high performance console". They are not going to spend their time bringing up competitors that their argument says is not in the same market. Basically, the FTC backed themselves into a corner and their case is pretty terribly. It's not their litigators fault. I know it isn't a good look in the courtroom, but those are the flaws of the case, not incompetence on the part FTC litigators. Fail in your market definition(s) and your theory of harm gets into deep shit real quick.

You can construe the judges comments as being instructive to a young litigator about their phrasing or as admonishment for not addressing the legal questions. Honestly, it is likely be a bit of both. The MS/ABK attorney's are, well, about as good and experienced as they get. My understanding is that a number of the FTC litigators are younger, less experienced attorney's and the judge is probably, in part, coaching them on how to conduct themselves in future proceedings.

I don't think the judge buys their market definitions or their theory of harm. The internal email from Ryan stating "We will be fine." is pretty damning as to competitive harm even if they judge were to accept the FTC's market definition. I'm not going to get into the politics of why the case was brought. It is in front of a federal judge who will judge the case on its merits. Something most observers say is lacking under the law.

 

[see colon]

The argument though is how harming competition, has trickle down effects to the consumer. So Sony or any other potential competitor is indeed related.

While that point could have been made, it wasn't. The FTC sometimes made the point that any foreclosures made could have a harm to Sony, but never showed how that would harm the consumer. Having to make a choice to buy an Xbox isn't unlike having to make a choice to buy a Playstation in terms of the consumer.

A quick point. The reason the FTC has made this about Sony is because that is how the FTC has chosen to define the market in their argument. Their argument hinges on the likes of PC, Nintendo, etcetera, being a separate market. Only Sony makes the other "high performance console".

Again, this doesn't matter. What matters is the harm does to the consumer. So they can define the market however they want, but they have to draw some sort of line between any harm caused to the competitor that would have a negative effect on consumers. There would certainly be cases when a merger would have a negative effect on a competitor, but a positive effect for the consumer.

 

[Shifty Geezer]

The argument though is how harming competition, has trickle down effects to the consumer.

Only if the competition is radically compromised. That argument would need to show Sony being crushed so utterly that MS becomes a monopoly and screws the consumer over. As it is, the case is pointing to Sony losing some market share, but as they already have plenty, it's not obvious that the consumer would suffer with a more balanced industry.

 

[Nesh]

Only if the competition is radically compromised. That argument would need to show Sony being crushed so utterly that MS becomes a monopoly and screws the consumer over. As it is, the case is pointing to Sony losing some market share, but as they already have plenty, it's not obvious that the consumer would suffer with a more balanced industry.

Thats a short term kind of thinking though, which is a problem in a lot of fabrics of society and business

 

[Johnny Awesome]

Not really. After 20 years we can hardly call the Sony vs. MS battle short term. MS is finally making moves to become more competitive with Sony and Sony fans just don't like it. The reality is that this deal is going to increase competition, not lessen it.

 

[Nesh]

Not really. After 20 years we can hardly call the Sony vs. MS battle short term. MS is finally making moves to become more competitive with Sony and Sony fans just don't like it. The reality is that this deal is going to increase competition, not lessen it.

Short term thinking involves the future not the past and it has nothing to do with Sony fans.

 

[Shifty Geezer]

Thats a short term kind of thinking though, which is a problem in a lot of fabrics of society and business

It's not really about a timeframe. If there's clear evidence MS will take a short term 5 year balancing of the industry and turn into a game-industry consuming monster, it'd be a bad choice. But nothing can really predict that far in advance. This hearing is about what impact ABK will make for consumers (well, to Sony, this hearing being crap about consumers...) which doesn't point to a huge disaster. The speculation that it would be harmful to consumers is theoretically if Cloud gaming takes off and MS can leverage content to dominate. Which I think a good consideration to ponder, but which is also probably beyond the purview of this or any case (save the CMA). It's also the kind of thing that probably prompts a scatter-gun approach to just blocking every large merger on the assumption (perhaps justified) that all bigger business ends up harmful for consumers.

I guess, I'd say the long term is a consideration for politicians and the whole principle of regulation, but for the framework we have to work with here and now and the law the judge has to operate with, there's no direct correlation between Sony losing market share and consoumer losing out. No-one is establishing that connection, and it cannot be implied within the domain of the written law.

 

[Silent_Buddha]

Some interesting bits and bobs from the trial, some we've already seen, some we might not have (at least I haven't).

https://gamerant.com/ftc-microsoft-trial-biggest-bombshells-reveals-sony-exclusivity-cod-bethesda/

So, Elder Scrolls 6 is set to be released at or after the release of Microsoft's "next gen" console. 5+ years from now for ES6 and next gen consoles are expected around 2028.

The trial also confirmed that Sony intends to keep Activision out of the PlayStation 6 loop should Microsoft manage to acquire the Call of Duty maker. 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.

While, I'd seen that Sony would deliberately choose not to have COD on PS6 for launch (although I guess the PS5 version of COD should run just fine on PS6 though BC), I hadn't seen the following before. It appears that ABK helped Sony with development of the PS5. I'm curious just how much and what that was? Gosh darn those redactions!!! Redacting the most interesting bits of information.

On the other hand, Obsidian's The Outer Worlds 2 that 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.

Again, I have a feeling that MS are slowly feeling their way towards potentially having most and possibly eventually all of their games released on rival platforms. It matches what Nadella has been guiding Microsoft towards WRT their business and industry software development targets (expansion of their software efforts on MacOS and Linux, for example) and releasing more of their former exclusives onto NSW as well as new game IP in the Minecraft IP onto PlayStation.

Of course, they are either starting small (The Outer Worlds 2, if it's released on PlayStation isn't exactly expected to be a system seller) or using new IP in an already established IP on PlayStation. I'd be really interested if they eventually release Hi-Fi Rush on PlayStation and NSW It's a fantastic little game that more people should get to play, IMO.

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 that Microsoft recently considered buying Sega and Bungie, as well as over a dozen other companies.

Main motivator as many of us speculated for ABK was to increase their footprint on mobile. MS were targeting Bungie for acquisition, so had likely been courting them. Unfortunately or fortunately (depending on your viewpoint as Microsoft was Bungies first choice if they were to be acquired), the ABK deal came up before Bungie decided they wanted to be acquired.

Also, it's another reason (beyond the fact that COD makes over 2/3rds of its revenue on PlayStation from the console versions of their games) they aren't too concerned or sad about keeping some/most of ABKs multiplatform games ... multiplatform. The jewel of the ABK deal for MS is King ... granted the rest of ABK is also a really good acquisition, but MS were prepared to make almost any concession asked as long as it allowed the deal to go through. COD on PlayStation indefinitely? Paraphrasing Phil Spencer under oath, "Sure, why not? We'll keep it on PlayStation indefinitely".

Regards,
SB

 

[eastmen]

A quick point. The reason the FTC has made this about Sony is because that is how the FTC has chosen to define the market in their argument. Their argument hinges on the likes of PC, Nintendo, etcetera, being a separate market. Only Sony makes the other "high performance console". They are not going to spend their time bringing up competitors that their argument says is not in the same market. Basically, the FTC backed themselves into a corner and their case is pretty terribly. It's not their litigators fault. I know it isn't a good look in the courtroom, but those are the flaws of the case, not incompetence on the part FTC litigators. Fail in your market definition(s) and your theory of harm gets into deep shit real quick.

You can construe the judges comments as being instructive to a young litigator about their phrasing or as admonishment for not addressing the legal questions. Honestly, it is likely be a bit of both. The MS/ABK attorney's are, well, about as good and experienced as they get. My understanding is that a number of the FTC litigators are younger, less experienced attorney's and the judge is probably, in part, coaching them on how to conduct themselves in future proceedings.

I don't think the judge buys their market definitions or their theory of harm. The internal email from Ryan stating "We will be fine." is pretty damning as to competitive harm even if they judge were to accept the FTC's market definition. I'm not going to get into the politics of why the case was brought. It is in front of a federal judge who will judge the case on its merits. Something most observers say is lacking under the law.

The judge had questioned them on it rather astutely.

When the FTC said the pc doesn't compete with the series s because of pricing she then asked why doesn't the switch compete against the series s when they are the same price then.

I don't think she is buying much of what they are putting out.

 

[Deleted member 11852]

When the FTC said the pc doesn't compete with the series s because of pricing she then asked why doesn't the switch compete against the series s when they are the same price then. I don't think she is buying much of what they are putting out.

This was an interesting exchange, because with other regulators Microsoft had argued that the market differentiators were based on performance, whereas this exchange had Microsoft concede that Nintendo Switch was a gaming competitor because it's price which created pressure on the pricing of Series S.

Personally I have never subscribed to the "high performance" console market being distinct to the exclusion of all else, because the you look at Playstation, Switch and Xbox, the greater commonality of software software sold in the wider market is exactly the same. Why is this any difference to Microsoft offering two configurations of hardware? If Microsoft genuinely believes any different, why were they pursuing agreements to bring Call of Duty to Nintendo hardware?

 

[Shifty Geezer]

Main motivator as many of us speculated for ABK was to increase their footprint on mobile. MS were targeting Bungie for acquisition, so had likely been courting them. Unfortunately or fortunately (depending on your viewpoint as Microsoft was Bungies first choice if they were to be acquired), the ABK deal came up before Bungie decided they wanted to be acquired.

Considering Bungie had already split from MS, what's the likelihood they would have wanted to get back together? Their deal wtih Sony is quite particular, remaining independently operated, so there were probably few buyers Bungie would consider.

Also, I see that acquisition was considered by the FTC, so it's not like Sony is operating its acquisitions with impunity as some imagine.

 

[Nesh]

It's not really about a timeframe. If there's clear evidence MS will take a short term 5 year balancing of the industry and turn into a game-industry consuming monster, it'd be a bad choice. But nothing can really predict that far in advance. This hearing is about what impact ABK will make for consumers (well, to Sony, this hearing being crap about consumers...) which doesn't point to a huge disaster. The speculation that it would be harmful to consumers is theoretically if Cloud gaming takes off and MS can leverage content to dominate. Which I think a good consideration to ponder, but which is also probably beyond the purview of this or any case (save the CMA). It's also the kind of thing that probably prompts a scatter-gun approach to just blocking every large merger on the assumption (perhaps justified) that all bigger business ends up harmful for consumers.

I guess, I'd say the long term is a consideration for politicians and the whole principle of regulation, but for the framework we have to work with here and now and the law the judge has to operate with, there's no direct correlation between Sony losing market share and consoumer losing out. No-one is establishing that connection, and it cannot be implied within the domain of the written law.

And thats where lies the problem. The concern is not there because they expect MS to keep releasing it's games on competing platforms. Since that appears all well, they shifted focus on Cloud.
The emails reveal that MS wants everything exclusive, but multiplatform releases are there 1) to appease regulators 2) the appearance of more financial gains under the current market conditions vs keeping them off.
There is a strong incentive to make everything exclusive when opportunity arises. If MS can buy out Sony out of Business gradually they will do it. And with the publisher/producer not being independent for negotiation, but dependent on the plans of the competitor, there will be no coming back. For example when Sony had trouble with PS3, they could still negotiate, find an agreement with independent developers and recover support. So can MS with their marketshare. But imagine for example if Sony owned ABK, Zenimax, SquareEnix and Capcom during the PS3 era where the market share ended 50%/50% between Sony and MS. Once XBOX One had a troublesome reputation and launch, Sony could have denied support further severing the XBOX's ability to recover. As long as these huge devs are independent, platform owners can still negotiate independently. There is no telling where this arms race is going to stop. They can keep buying.

 

[Silent_Buddha]

Considering Bungie had already split from MS, what's the likelihood they would have wanted to get back together? Their deal wtih Sony is quite particular, remaining independently operated, so there were probably few buyers Bungie would consider.

Also, I see that acquisition was considered by the FTC, so it's not like Sony is operating its acquisitions with impunity as some imagine.

I could be mistaken, but I swear I remember reading an article that Bungie approached MS WRT being acquired by Microsoft but Microsoft turned them down due to the impending ABK acquisition and thus they then went to Sony. I don't have time to look for the article so it's entirely possible I'm misremembering it.

Regards,
SB

 

[see colon]

Again, I have a feeling that MS are slowly feeling their way towards potentially having most and possibly eventually all of their games released on rival platforms. It matches what Nadella has been guiding Microsoft towards WRT their business and industry software development targets (expansion of their software efforts on MacOS and Linux, for example) and releasing more of their former exclusives onto NSW as well as new game IP in the Minecraft IP onto PlayStation.

I think we would be there already if Playstation and Switch allowed Gamepass.

 

[stu11]

I think we would be there already if PlayStation and Switch allowed Game Pass.

LOL and would Microsoft allow PlayStation Plus and Switch Online to be added to Xbox?

TBH this will likely end up happening in the distant future anyway, as Microsoft is probably going to get their deal with Activision allowed and this creates the legal precedent for MS to acquire more and more studios and publishers, MS then locks this new content behind Game Pass meaning that there will be fewer games being released on future PlayStations and the next Nintendo platforms.

Eventually, Sony will likely be forced to accept Game Pass or have to shut down the PlayStation hardware business and either sell off their studios or go software only. As for Nintendo, I expect they would continue to build consoles as they know that people will buy a Nintendo console just to play their games.

 

[GhostofWar]

I'm curious just how much and what that was?

I saw something about it, probably on twitter so i'm not sure how accurate it is but it was apparently the new trigger haptics they helped with.

 

[eastmen]

This was an interesting exchange, because with other regulators Microsoft had argued that the market differentiators were based on performance, whereas this exchange had Microsoft concede that Nintendo Switch was a gaming competitor because it's price which created pressure on the pricing of Series S.

Personally I have never subscribed to the "high performance" console market being distinct to the exclusion of all else, because the you look at Playstation, Switch and Xbox, the greater commonality of software software sold in the wider market is exactly the same. Why is this any difference to Microsoft offering two configurations of hardware? If Microsoft genuinely believes any different, why were they pursuing agreements to bring Call of Duty to Nintendo hardware?

Yes I think pc/ps/xbox/nintendo are all competing along with the tiny cloud spot inside of it. I think the only thing that is really a separate market is mobile gaming. Even with younger kids like my nephew/nieces and cousins kids they all will still play console games and play phone games when they are out and about.

 

[Silenti]

The judge had questioned them on it rather astutely.

When the FTC said the pc doesn't compete with the series s because of pricing she then asked why doesn't the switch compete against the series s when they are the same price then.

I don't think she is buying much of what they are putting out.

My post was supposed to be a response to yours. Somehow I missed quoting you. It was a hectic day. Apologies.

Reading some of the the arguments got me thinking of the SC Meta case when reading about this one. The moment when, I believe it was the government attorney, in reply to a question, stopped himself mid-sentence. "I think that view is simp...." deep pause. The justices chuckle and tell him to go ahead and say it. Call my view simple. It can be nerve wracking in court. Nervous laughter and corrections from the presiding judge(s) are pretty common. As to the judges questions here, I would love to hear some of the recordings to get a bit of context. Just fun stuff.

And I completely agree with you, if that wasn't clear. The judge didn't seem to be buying much of anything from the FTC and was a bit skeptical about some of the testimony from one of MS's economic experts. Did you catch what that one guy was paid? Think it was the Harvard economics professor. Something like $2000/ hour. Makes some of what I have to ponder just seem like chicken feed.

 

[mrcorbo]

I think the judge's questioning around Sony's ability, were they to lose access to certain IPs, to replace them with either internally-developed IPs or by promoting alternative 3rd-party IPs to take their place was rather insightful. Isn't part of what makes titles such as CoD such sales juggernauts their presence on multiple platforms? Doesn't reducing that addressable market open up opportunities for others to step in and fill that void?

We've all seen once-dominant IP (along the production entities behind them) across all kinds of media platforms decline to irrelevance over time and seen new content and content producers come from nothing to lead their market. As per the judge's question, what's stopping Sony, or anyone else with sufficient resources, from developing competing content that rivals what they may lose? And if I were a professional in the industry I'd be salivating at the possibilities this would create to build new things.