The Battle for Xbox’s Merger with Activision: A Deep Dive into the FTC Hearings

Introduction: In the ongoing legal battle between the Federal Trade Commission (FTC) and Microsoft over Xbox’s merger with Activision, a series of testimonies unfolded, captivating the gaming community. The courtroom drama saw key figures such as Microsoft’s Phil Spencer, Google Stadia’s Dov Zimring, and others take the stand. Amidst intense questioning and debates, the future of the Xbox-Activision merger hung in the balance. Let’s delve into the details and explore the implications of this high-stakes clash.

Phil Spencer’s Courtroom Performance: Phil Spencer, the distinguished head of Xbox, became the focal point of the proceedings. Clad in a suit, he faced extensive questioning from the FTC, expertly outlining Xbox’s mobile-focused strategy in acquiring Activision. He presented a clear roadmap of their intentions, emphasizing how the merger could strengthen Xbox’s market position. However, there were moments of tension as Spencer patiently explained the intricacies of financial aspects related to acquisitions to the FTC lawyer, James Weingarten.

Defining Relevant Markets: The FTC dedicated a significant portion of time to defining the “relevant markets” in an attempt to prove that Microsoft’s acquisition of Activision would harm competition. One such market under scrutiny was high-end consoles, specifically the PlayStation 5 and Xbox Series X and S. Interestingly, the Nintendo Switch was excluded from this market definition. Xbox argued that it occupied the third position, behind both PlayStation and Switch, and acquiring Activision would help bolster its standing without adversely affecting competition. By removing the Switch from the competitive landscape, the FTC aimed to tip the scales in Xbox’s favor. However, their efforts to prove that Microsoft does not consider the Switch a serious competitor fell short.

Xbox’s Global Market Strategy: Another significant discussion revolved around Xbox’s comparatively larger market share in the United States and the FTC’s attempt to portray it as anti-competitive. In response, Spencer emphasized that the gaming industry operates globally, with developers and console manufacturers designing their products for a worldwide market. While this line of questioning received minimal attention, it highlighted Xbox’s global aspirations and its commitment to catering to diverse gaming audiences.

Content is King: Microsoft’s counsel, Beth Wilkinson, led a cohesive cross-examination, allowing Spencer to articulate Xbox’s strategy in acquiring Activision Blizzard. They emphasized that it would be illogical for developers to intentionally degrade games on other platforms, and withdrawing popular franchises like Call of Duty from PlayStation would harm the brand’s reputation. Furthermore, Spencer provided insights into Xbox’s mobile strategy, acknowledging past challenges with xCloud but expressing optimism in leveraging Activision’s expertise to establish a strong presence in the mobile gaming market. Xbox aimed to create a gaming storefront on mobile phones, tailored to Google and Apple platforms, which could potentially disrupt the dominance of these tech giants.

The FTC’s Misunderstandings: Throughout the proceedings, the FTC raised questions that revealed a lack of understanding of the gaming industry’s dynamics. An example was their focus on why Minecraft had not been optimized for the PlayStation 5. Weingarten seemed unaware that Sony had never made an offer for the game to be on their service. Additionally, the FTC lawyer questioned Microsoft’s ability to afford a large acquisition while not securing exclusive rights to certain games like Final Fantasy. This prompted an intriguing exchange where Spencer explained the intricacies of financial agreements to the FTC.

The Promise of Call of Duty on PlayStation: One memorable moment occurred when Spencer, under oath, made a commitment to keep Call of Duty on PlayStation. This pledge, which he had previously reiterated publicly, received attention during the cross-examination. However, the FTC lawyer attempted to challenge the promise, questioning Spencer’s ability to make it without knowing the terms and conditions of the merger. Spencer responded firmly, reiterating his dedication to maintaining the Call of Duty franchise’s multi-platform availability.

Conclusion: As the FTC hearings reached their conclusion, the future of Xbox’s merger with Activision remained uncertain. The proceedings shed light on Xbox’s strategic intentions, emphasizing its focus on the mobile gaming market and global expansion. Phil Spencer’s composed demeanor and persuasive arguments showcased Xbox’s determination to secure the merger while allaying concerns about anti-competitive practices. Ultimately, the fate of the Xbox-Activision merger now lies in the hands of the regulatory authorities, as the gaming community awaits the final decision that could shape the industry’s landscape for years to come.