Microsoft’s FTC Battle Hinges on Call of Duty: The High-Stakes Showdown

 

Both sides presented closing arguments at the recent Federal Trade Commission v. Microsoft hearing. The case is focused on the potential effects of Microsoft’s proposed acquisition of Activision Blizzard on gaming industry competition, particularly with respect to the well-known Call of Duty franchise.

The FTC’s reasoning is based on the idea that Microsoft’s acquisition might have a negative effect on competition by either restricting access to Call of Duty to Xbox platforms or changing the PlayStation version. It’s important to note that numerous regulatory bodies throughout the world, such as the European Commission and the UK’s Competition and Markets Authority (CMA), did not agree with this claim, which made it difficult for the FTC to make its case.

The FTC struggled throughout the hearing to provide evidence of how the transaction would affect consumers. Judge Jacqueline Scott Corley continually questioned Call of Duty’s importance as a motivator of competition and enquired as to how many PlayStation users might migrate to Xbox if Call of Duty were to vanish from the PlayStation ecosystem. Instead of investigating concerns about cloud gaming competition, which was a crucial issue raised by both the European Commission and the CMA, the FTC’s argument centered exclusively on Call of Duty and Xbox console exclusivity. The CMA completely denied the sale because of similar concerns, however the European Commission accepted the acquisition after receiving Microsoft’s assurances regarding cloud-related problems.

Tim Stuart, the chief financial officer of Xbox, was subjected to a barrage of questions during the hearing on the purchases of Bethesda and Activision Blizzard in particular. According to documents that have surfaced, Microsoft may withhold Activision games to help its Xbox Game Pass subscription service. A startling revelation made by the FTC during the hearing was that Microsoft would require an extra 2 million Xbox Game Pass users per year to make up for a rumored drop in Call of Duty royalty revenues from PlayStation. Although the precise figures were to remain private, this information shed light on Microsoft’s prospective profit margins for Call of Duty on PlayStation. Microsoft’s interest in mobile gaming prospects under the Activision Blizzard transaction was also discussed throughout the session. Microsoft compares the move to electric cars to the potential of the mobile game sector. To avoid falling behind when the market inevitably switches to new models and technology is the basic premise. The closing arguments included a more extensive discussion that gave both parties the chance to refute one another’s assertions and respond to Judge Corley’s inquiries.

The FTC emphasized the relevance of Call of Duty and other franchises in encouraging consumers to join Game Pass,a key element of Microsoft’s strategy, while reiterating that the acquisition of Activision Blizzard by Microsoft raises serious concerns about potential anti-competitive impacts.

Microsoft, though, countered that the business is accustomed to using unique material as a competitive advantage. Microsoft CEO Satya Nadella has acknowledged his reluctance to live in an exclusive world of content but believes it is necessary due to competition, highlighting how content creation continues to flourish across a variety of channels. Both parties presented their perspectives on how the future of the gaming business will be shaped by the expanding world of cloud gaming and subscription services during the conversation, which also covered these topics in depth. The FTC voiced worries about the negative effects on consumers of the potential consolidation of content under subscription services like Game Pass. Judge Corley will ultimately decide on a course of action and issue an order in the upcoming days. Unless Microsoft decides to renegotiate with Activision Blizzard, the deal’s fate may be sealed if the FTC receives a preliminary injunction.

In contrast, if Microsoft wins, the FTC might have the chance to appeal, albeit such victories are uncommon. The verdict in this case will have a big impact on the future scrutiny of big acquisitions in the gaming sector. Additionally, it will offer light on how the gaming and cloud gaming industries’ competitive dynamics are changing.

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