Activision takeover: What competition authorities' examinations have taught us about Microsoft's strategy

You don't spend so many billions without attracting attention: Microsoft's $69 billion takeover of Activision Blizzard, announced in 2022, has led to scrutiny by competition authorities in major gaming markets video

Activision takeover: What competition authorities' examinations have taught us about Microsoft's strategy

You don't spend so many billions without attracting attention: Microsoft's $69 billion takeover of Activision Blizzard, announced in 2022, has led to scrutiny by competition authorities in major gaming markets video. It has been effective since October 13.

In the meantime, Microsoft found itself confronted by the US Federal Trade Commission (FTC), which launched legal proceedings to try to block the takeover, as well as an initial veto from the UK's Competition and Market Authority (CMA). , lifted in September.

These two procedures led to the transmission of internal documents and still confidential information from the publisher Activision Blizzard, Sony and Microsoft (respectively manufacturers of the Xbox and PlayStation consoles). Made public, sometimes by accident, this information has shed new light behind the scenes of the video game industry.

Catch up

In October 2022, a CMA report began by revealing the share of Xbox consoles on the market – a figure on which the company has not communicated since 2015. It thus appears that in 2021, 63 million Xboxes had found takers, compared to 151 million PlayStations.

The British report also reveals a bold strategy considered by Microsoft in 2017 to sell, if not consoles, at least games: offering to make it possible to access its subscription games service, Game Pass, from a PlayStation console. But Sony has “chosen to block” this sort of Netflix of video games on its platforms. From there, a change of strategy: Microsoft will put its hand into its wallet to fill its catalog with tempting exclusives.

Internal documents submitted to the FTC show that the company has its sights set on many studios. The takeovers of Zynga (acquired by the publisher Take-Two in 2022) or Playrix, specialists in mobile games, but also of Bungie (which PlayStation got its hands on in 2022) or the Japanese Sega and Square Enix were considered. . An internal email from Microsoft even reveals one of the dreams of Phil Spencer, the boss of Xbox, during a conversation with another executive of the company: to become owner of the giant Nintendo.

The war of exclusivities

In 2020, the Redmond (Washington) firm began absorbing ZeniMax (which owns ID Software, Bethesda and Arkane) by paying $7.5 billion. A way for Phil Spencer to block the transition to PlayStation, we discovered during the lawsuit brought by the FTC: the latter fears that Starfield, Bethesda's latest production, released on September 6, will go under the Sony flag.

After the takeover, ZeniMax's new releases became Xbox exclusives: Starfield, but also Hi-Fi Rush and Redfall. The fate of Bethesda's next game, The Elder Scrolls VI, of which there has been no news since 2018, is however uncertain. And for good reason, according to the boss of Xbox, interviewed by the FTC, it will not be released for another five years.

It's not just Microsoft whose secrets have been exposed. Documents sent to the FTC by Sony revealed the budgets for the exclusives The Last of Us 2 ($220 million) and Horizon: Forbidden West ($212 million). The company would have preferred to keep these figures to itself, but it was betrayed by poor concealment of the amounts on documents shown to the public.

The same clumsiness also made it possible to know the amount of turnover generated by Call of Duty, a juggernaut game published by Activision Blizzard and released on PlayStation in 2021: according to Sony, the game generated 800 million dollars (755.67 million euros) on its consoles in the United States alone that year, and 1.5 billion dollars worldwide. This is also the argument put forward by Sony to convince regulators to cancel Microsoft's operation. According to the Japanese company's video game division, its American counterpart wants to use the popularity of Call of Duty to degrade the experience of players on PlayStation.

This vehemence, however, appears to be a bluff. The FTC's revelation of an email from PlayStation CEO Jim Ryan shows that he never really believed the threat: "I've spent enough time with Phil [Spencer] and Bobby [ Kotick, CEO of Activision Blizzard]. I'm pretty sure we're still going to see [Call of Duty] on [PlayStation] for years to come,” he wrote, two days after the buyout was announced. An agreement was finally signed in July 2023 with Microsoft to ensure that the series would be available on rival consoles for at least ten years.

Clues about the new consoles

The agreement on Call of Duty benefits Sony as much as Nintendo, which is absent from the audiences. The shooter has never been offered on the Switch, the most popular console at the moment, but also the least powerful. The boss of Activision Blizzard also expressed a mea culpa on this point and said he “regretted” not having marketed his war game on “the second best-selling console of all time”. Bobby Kotick's praise of Nintendo, however, came with embarrassing indiscretions for the Kyoto-based company.

The businessman thus openly mentioned, before the Californian court where the trial brought by the FTC was taking place, the prototype of the machine which will succeed the Switch, still under the seal of secrecy: he thus explained having attended to a presentation of a prototype at the end of 2022 and that its power will be similar to that of the PlayStation 4 and Xbox One consoles.

Microsoft's very secret console projects were also revealed during these proceedings: Microsoft thus accidentally transmitted secret documents to the FTC, in which a new version of the Xbox Series cylindrical design without a disc drive, as well as a new generation controller with an accelerometer.

An image dated May 2022 finally reveals an important date for the future of the company: 2028. It is the one that appears in one of these documents evoking the release of a still hypothetical next generation of Xbox console which would run “hybrid” streaming games, leveraging “the combined power of machine and cloud.” It is impossible to know if this information is still valid today, Phil Spencer having hastened, in the hours following the leak, to assure that certain hypotheses had since been ruled out. However, they constitute a rare testimony to the internal discussions within a giant of this industry, generally stingy with confidences.