The lawsuit between the FTC and Microsoft regarding the injunction to stop the Activision Blizzard takeover opened on Thursday, June 22, 2023. As expected, this legal showdown has been the site of several behind-the-scenes industry revelations .
The court is the place where brands are sometimes forced to abandon pretense to declare the truth and nothing but the truth. It is therefore a perfect opportunity to learn more behind the scenes of an industry and to dissect juicy details.
As in the case of the Epic Games vs. Apple lawsuit, the lawsuit between the FTC and Microsoft in federal court in California is already revealing some of these details. Here is a summary of what we learned on the first day of the trial.
A PS6 and a new Xbox from 2028?
Even before the start of the trial, one of the legal documents set fire to the video game press. We can, in fact, read that Microsoft predicts the launch of the next generation of consoles for the year 2028. This would be the estimated year for the launch of the PlayStation 6 and the next Xbox.
You may also have read statements about the next Xbox or PS6. In this document, Microsoft estimates with a wet finger that the next consoles would be for 2028.
It’s just about the 10-year contract they’re offering Sony for ABK games. pic.twitter.com/O18SmVtoqk
— Cassim Ketfi (@NotCassim) June 22, 2023
This date is important for Microsoft, because the firm has promised a 10-year contract to Sony to guarantee PlayStation access to Activision Blizzard games. The contract would therefore still be valid when the next generation of consoles is launched.
In a testimony dated April 2023 before the FTC, Jim Ryan, the boss of PlayStation, declares that Sony would no longer wish to communicate information on its next game console if the takeover took place. ” One simply could not run the risk of a company belonging to a direct competitor having access to this information. “.
Call of Duty could have been a PS5 exclusive
The testimony of Sarah Bond, who is the head of the Xbox ecosystem which includes the relationship with external developers, revealed details about the relationship between Microsoft and Activision.
We were able to discover in particular that Bobby Kotick, the boss of Activision, forced the renegotiation of the income sharing between Microsoft and the publisher thanks to Call of Duty. Indeed, the boss threatened not to launch Call of Duty on Xbox Series in 2020 when the console generation launched. De facto, this would have made Call of Duty a PS5 exclusive.
Given the strength of the license, it was an impossible eventuality for Microsoft to agree to renegotiate the revenue share. We understand from the testimony that the firm has validated an 80/20 split in favor of Activision, rather than the classic 70/30 split practiced in the industry.
In addition, we learn from Sarah Bond that the marketing contract between PlayStation and Activision on the launch of Call of Duty Vanguard prevented Microsoft from announcing in its conference an availability of the game on Xbox.
The revelation on revenue sharing and behind the scenes of the negotiation could have repercussions on future negotiations carried out by Microsoft with other partners such as Ubisoft or EA.
Indiana Jones will be an Xbox exclusive because of Microsoft
On January 12, 2021, Bethesda revealed that the publisher had signed with Lucasfilm Games for the development of an Indiana Jones game, the nature of which we have absolutely no information about. Since the game was announced after Microsoft took over Bethesda, but the contract was signed before, the question of Xbox exclusivity had been raised ever since.
You have read it elsewhere, the testimony of Peter Hines (Bethesda) reveals that Indiana Jones will indeed be an Xbox/PC exclusive while the contract with Disney (before the takeover) was for a cross-platform game.
Microsoft has changed the contract.
— Cassim Ketfi (@NotCassim) June 22, 2023
The testimony of Peter Hines, the publishing director at Bethesda, helped to clarify the situation. The original contract was indeed for the development of a cross-platform game, a common practice for a game adapted from a cinema license, but Microsoft had the contract modified after the takeover.
From now on, Indiana Jones is officially a Microsoft exclusive which should therefore only be released on PC and Xbox consoles.
PlayStation wouldn’t really have any problems with the takeover
Since announcing the proposed takeover of Activision Blizzard, Sony PlayStation has been a particularly vocal opponent of the idea. The brand has repeatedly claimed that the risk of Call of Duty becoming a Microsoft exclusive could endanger the future of PlayStation.
During the trial with the FTC, Microsoft revealed an exchange of emails between Jim Ryan, the boss of PlayStation, and Chris Deering, then president of the European branch. In this exchange, Jim Ryan confesses that ” it is not at all a question of exclusivity, Microsoft sees bigger than that. I’m pretty sure we’ll continue to see CoD on PlayStation for many years to come. ” before concluding “ Everything will be alright. We’ll be more than fine “.
Microsoft didn’t want to put its games on Nvidia
“ No way is Matt Booty’s response in 2019 to the question of bringing Xbox Game Studio games to the Nvidia GeForce Now cloud gaming service: ” we removed all Xbox Game Studios titles from GeForce Now, so as not to compete with xCloud “. He justifies his decision at the time by the frustration generated by Nvidia at that time: I was frustrated with the process. We did not have clear agreements with Nvidia for the use of our licenses. In some cases, they were putting games on our service without our permission”.
In 2023, the situation has changed a lot and Nvidia has achieved a masterstroke: signing for 10 years the arrival of all Xbox and Bethesda games on its platform, regardless of the outcome of the trial. The firm will also obtain Activision Blizzard games if the takeover is successful.
Microsoft was working on a dedicated cloud subscription
During the trial, Microsoft wanted to downplay the strength of its cloud gaming service. According to the firm, the majority of Xbox Cloud Gaming usage today is on an Xbox console for stream a game while waiting for it to be downloaded. In other words, it would be seen as a simple function of the console, and not as a separate market.
Sarah Bond admitted that Microsoft was working on creating a dedicated Xbox Cloud Gaming access subscription that was not integrated with Xbox Game Pass. The firm would have changed its strategy in view of the infrastructure cost of its service. According to Sarah Bond, Microsoft now prefers to sign contracts with other service providers.
Xbox once again admits defeat
During the trial, Microsoft reiterated its admission of failure in the game console market against Nintendo and PlayStation. We can read in a document that Microsoft admits to being 3rd in the market since its arrival in 2001.
The Xbox console has consistently ranked third (out of three) behind PlayStation and Nintendo in terms of sales. In 2021, Xbox’s share was 16%. Similarly, when it comes to console revenue and the share of consoles currently in use by gamers (“installed base”), Xbox is bottom of the pack at 21%.
According to the firm, the main motivator of its takeover is Candy Crush even before Call of Duty: “players are switching to smartphones,” said Beth Wilkinson, Microsoft’s senior counsel, in her preliminary remarks. This market would represent 145 billion dollars and 94% of players would also be smartphone players.
The end of the first day
These revelations took place during the first day of the hearing, but the trial continues. The 2nd day, scheduled for this Friday, June 23, should see Phil Spencer, boss of Microsoft Gaming, and Jim Ryan, boss of PlayStation, testify. They will be joined by Dov Zimring, who worked for Google Stadia, and Jamie Lawver, one of Microsoft’s chief financial officers.