More from FTC v. Microsoft: all the news from the big Xbox courtroom battle
“Do you view Sony as an aggressive competitor?” asks the FTC. “Sony is the market leader with a considerable capability and an aggressive competitor,” says Phil Spencer.
“Every time we ship a game on PlayStation... Sony captures 30 percent of the revenue that we do on their platform and then they use that money among other revenue that they have to do things to try to reduce Xbox’s survival on the market,” says Spencer. “We try to compete, but as I said, over the last 20 years we’ve failed to do that effectively.”
“Do you think that microsoft gaming lost the console wars?” asks the FTC’s lawyer. Oh boy.
“As the console wars is a social construct with the community, I would never want to count our community out, they’re big fans,” Spencer answered carefully. “If you look at our market share in the console space over the last 20 plus years, we’re in third place. We are behind Sony and Nintendo in console share globally.”
We are on a 15-minute break. So far the FTC has been grilling Xbox chief Phil Spencer over console market share. He admits that Xbox has been more competitive in the US with Sony than in Europe.
We can’t see any of the documents being referenced in this questioning, but it’s all about Microsoft’s internal competition analysis and performance metrics.
The FTC wants to prove that its “high performance” definition of the console market, just Xbox and PlayStation, is correct. Microsoft wants to include the Nintendo Switch, but the FTC argues its internal analysis doesn’t always compare against the Switch.
We’ll be back soon to hear more about this as Microsoft and the FTC continue to disagree over the basics.
The FTC is now asking Phil Spencer about a bunch of redacted documents related to market analysis and metrics that are shared with the Microsoft board. There’s a scorecard which includes four metrics for performance.
The argument here is that Microsoft only compares Xbox against PlayStation internally, but that it’s trying to compare to Nintendo Switch with regulators to put itself in third place in the market. The FTC wants to prove that its “high performance” console market of the PS5 and Xbox Series S / X is the relevant market, not one that includes the Switch.
Interestingly, one of the documents includes Microsoft’s Xbox Series S / X market share. That will almost certainly be redacted for public view, though.
The FTC doesn’t think the Nintendo Switch should be counted in the market that the Xbox operates in. It has been a source of debate between Microsoft and the FTC and now the FTC is grilling Spencer about the Switch.
“The Switch was designed for people to take on the go,” says Spencer. “It has a battery, it’s a mobile platform people can take it with them. Whereas the Gen 8 [Xbox One] consoles require that they’re plugged into the wall and don’t have a screen. Nintendo built a different platform.”
But the FTC reads Spencer’s previous testimony back to him. “In terms of CPU and GPU it would be more akin to a Gen 8 device,” said Spencer previously.
The questioning then moves on to how many fps the Xbox Series X / S consoles can support. Spencer says he doesn’t know the fps that Nintendo Switch support. Finally, he’s asked about GPU teraflops, as the FTC is once again trying to demonstrate the Nintendo Switch is different to the PS5 and Xbox Series S / X consoles.
“Xbox X metric operates higher FLOPs than Switch?” asks the FTC lawyer. “That’s fair to say,” says Spencer.
For some reason the FTC lawyer keeps calling the Xbox ecosystem the Xbox echo-system. But beyond that Phil Spencer is being questioned about revenue splits on Xbox between creators and Microsoft and those on PC.
“We talk about Xbox ecosystem as the platform where creators build games for players to play,” says Spencer.
We’re back after the courtroom was briefly sealed. Microsoft Gaming CEO and head of Xbox Phil Spencer is in court and ready to discuss the $68.7 billion proposed acquisition of Activision Blizzard. Judging by the exhibit list that both the FTC and Microsoft have submitted it looks like Spencer is going to have a busy day.
He’s come well prepared in a suit and tie, which is unusual attire for a gamer.
We might be about to hear more around Microsoft’s xCloud strategy, how the company’s Activision Blizzard deal came to be, and some details around PlayStation publishing agreements.
It’s been nearly an hour since Judge Corley sealed the courtroom and we’re still waiting for media and members of the public to be allowed back inside. Jamie Lawver, senior finance director at Xbox, is currently testifying about highly confidential Microsoft financial data.
Xbox chief Phil Spencer is due in court today as a witness and he’s apparently sporting a suit and tie. He wasn’t wearing a tie yesterday, so he’s upgraded for the ̶g̶r̶i̶l̶l̶i̶n̶g̶ witness stand today.
I can’t remember the last time I was in a suit, let alone Phil Spencer. He’s usually wearing a T-shirt that hints at an Xbox game.
Jamie Lawver, senior finance director at Xbox, is appearing now, but Judge Corley is sealing the courtroom. “There’s just no way to conduct this particular witness in open court,” says Judge Corley, due to highly confidential finance information. That means the courtroom will be sealed and not open to the public for around 45 minutes.
So a little delay to proceedings this morning.
It’s the second day of witness testimony and today we’re going to hear from the heads of both PlayStation and Xbox and Google’s former Stadia product lead. It’s going to be a busy day.
The hearing will start at 8:30AM PT / 11:30AM ET and we’ll have all the key details as we get them. Here’s the full list of today’s witnesses:
• Jamie Lawver, senior finance director at Xbox.
• Phil Spencer, Microsoft Gaming CEO and Xbox chief
• Jim Ryan, Sony PlayStation chief
• Dov Zimring, Google’s former Stadia product lead
Day one of the FTC v. Microsoft hearing was all about a surprise email, Xbox exclusives, and a costly cloud.
I love the chaos of this FTC v. Microsoft hearing, where confidential documents are dragged to court alongside a PS5. Philip Pacheco from Getty Images perfectly captures the mayhem outside a US courthouse building, as FTC attorneys juggle with a witness binder for Sarah Bond, head of Xbox creator experience, and a PS5 console.
Day two of the hearing kicks off at 8:30AM PT / 11:30AM ET and you can bet we’ll be covering the less chaotic proceedings inside the courtroom live right here.
We’ll get to hear from Xbox chief Phil Spencer during day two of the FTC v. Microsoft hearing. We’ll also hear from PlayStation chief Jim Ryan, via a prerecorded video deposition, Dov Zimring, former Stadia product lead, and Jamie Lawver, a senior finance director at Microsoft.
Judging by the exhibit list, it looks like Phil Spencer is going to have a busy day on the stand.
A full day of testimony is wrapped and we’ve had a lot of news in such a short space of time. Here are the key takeaways from today:
• PlayStation chief Jim Ryan knew Microsoft’s Activision deal wasn’t about Xbox exclusives
• Microsoft didn’t want its games on GeForce Now initially. “No effing way.”
• Indiana Jones is an Xbox and PC exclusive
• 76-year-old dads might just love a bit of Diablo
• Activision forced Microsoft into a Call of Duty revenue deal
• Microsoft has agreed to 80 / 20 Xbox revenue splits for certain games
• Microsoft was working on a separate “dedicated” version of Xbox Cloud Gaming
We’ll be back tomorrow to follow along live at 8:30AM PT / 11:30AM ET.
Microsoft revealed earlier that PlayStation chief Jim Ryan knew its proposed Activision deal wasn’t about Xbox exclusives. “It is not an exclusivity play at all,” said Ryan in an email read out in court. “They’re thinking bigger than that and they have the cash to make moves like this.
Now Microsoft has fired back again. “Today showed Sony has known all along we’ll stand by our promise to keep games on its platform and made clear its work to lobby against the deal is only to protect its dominant position in the market,” says David Cuddy, general manager of public affairs at Microsoft, in a statement to The Verge.
Microsoft has argued that Xbox Cloud Gaming (xCloud) is just an add-on or a feature, but the company was working on a dedicated version of Xbox Cloud Gaming that wasn’t tied to its premium Xbox Game Pass Ultimate tier.
Xbox’s Sarah Bond was asked about this in September 2022 and said “Xbox would very much like to do it.” But Microsoft has strangely changed its mind, perhaps thanks to regulatory concerns around cloud gaming.
Bond says Microsoft’s strategy has changed and the company has been analyzing usage. “Operational costs are higher” and Microsoft has made deals with partners that offer similar cloud gaming services.
Microsoft also previously promised that Xbox Cloud Gaming would support your existing game library by the end of 2022. That never happened and Microsoft didn’t respond to a request for comment on the delay when The Verge asked earlier this month.
Microsoft has agreed to lower revenue splits than its typical 70 / 30 percent split for Xbox games. FTC’s counsel accidentally mentioned the 80 percent split while questioning Xbox’s Sarah Bond. Microsoft agrees to the lower revenue split “where we believe it was critical to get that content,” according to Bond’s previous testimony.
Sarah Bond reached out to Valve to offer a 10-year deal for Call of Duty on Steam. “Valve believed strongly that content should be on their platform... they do not want to be seen to signing contracts that lock up or drive commitments to content over 10-year periods of time,” said Bond. “They don’t have any such other agreements. They told us they had no need to sign that agreement and that they believed us that we would continue to provide it on Steam.”
Sarah Bond is detailing how Microsoft had to agree to a new revenue share deal with Activision to get Call of Duty on the Xbox Series S / X consoles. Activision refused to agree to prepare its Xbox dev kit work and hinted that it had a different revenue share with PlayStation.
Activision Bobby Kotick wanted Microsoft to agree to a new revenue share deal before work begun on Call of Duty for Xbox Series S / X. “It was clear that Call of Duty would be on PS5 and that would not have been good if it was not also on Xbox if it was launching at the same time,” says Bond.
Activision also asked Microsoft if it wanted to bid on marketing deals for Call of Duty, but it declined. That ultimately meant Microsoft couldn’t show Call of Duty in its own Xbox showcase.
Everyone is fed and watered and we’re back to proceedings after the 45-minute lunch break. All I want to know is whether any of Microsoft’s Xbox executives snuck off to play some xCloud.
Sarah Bond is back in the witness stand and we’re starting questioning around Call of Duty. “It’s a game about being a savior in a war scenario,” explains Bond. Hmm not sure I’ve always played a “savior” in Call of Duty games, but here we are.
We’re on a 45-minute break so hearing participants can finish their quests and dungeons... I mean lunch. Let’s recap what we’ve heard from Bethesda’s Pete Hines and Xbox’s Sarah Bond.
Hines started off by self dunking on Redfall, admitting there “might be some differences of opinion” on whether it meets the triple-A standard. It wasn’t an intentional diss of Redfall, but given how disappointing the game was it might as well have been.
The FTC’s counsel then led Hines down the garden path towards the pit where Starfield on PS5 is buried. Hines was reminded of his apologies to PS5 players who won’t be able to play Starfield on their consoles. “I don’t like it when our players are upset over something we do,” said Hines. The FTC argues game exclusivity is an anti-competitive move, but Hines made the opposite case that it allows developers to streamline a game. “We would not be putting this game out in nine weeks if we were supporting an entire additional platform, in my opinion.”
Questioning then moved on to other Bethesda exclusive games and Hines revealed the upcoming Indiana Jones game is exclusive to Xbox and PC. The game was originally announced in 2021, just months before Microsoft finalized its $7.5 billion deal to acquire Bethesda. There was a contract in place with Disney to ship Indiana Jones on multiple consoles, but the game was made Xbox exclusive after Microsoft’s acquisition. The FTC argues that this behavior could carry across to Activision Blizzard games if Microsoft was to close its $68.7 billion proposed acquisition.
Sarah Bond, head of Xbox creator experience, was next to testify. There was a fun exchange around Diablo. Bond explained the franchise to Judge Corley and noted it’s “literally my father’s favorite game.”
Judge Corley then asked Bond about Xbox Game Pass and we got some details about how the program started and how it can generate interest in subscribers buying up games they haven’t played before.
Bond also touched briefly on Xbox Cloud Gaming. The FTC argues cloud gaming is a separate market, but Bond claims it’s just a feature right now. Honest.
“We believe there is going to be 2 billion gamers in the world, and our goal is to reach every one of them,” was the message from Kareem Choudhry, head of cloud gaming at Microsoft, when the company first stared talking about xCloud in 2018.
No not that Bond! Sarah Bond, head of Xbox creator experience, is explaining Xbox Game Pass to Judge Corley. “When we first started the program it was new... there was concern expressed by publishers,” says Bond. “We do licensing agreements to ensure overall that it’s beneficial for both sides. What we’ve found is that it actually generated a lot of discovery of games.”
Microsoft says 60 percent of people who played Human Fall Flat, a puzzle game, had not played that type of game before. 40 percent of that 60 percent then went on to purchase a puzzle game in the Microsoft Store.
Bond also discusses Xbox Game Pass Ultimate, which includes Xbox Cloud Gaming (xCloud). The FTC argues cloud gaming is a separate market, but Microsoft claims it’s just a feature right now. “It’s a feature and delivery mechanism, most of our usage is on console.” But Microsoft has bigger cloud gaming ambitions to stream its Xbox games to iOS and Android and reach billions of players through a dedicated Xbox mobile store.
“The Diablo franchise is built on this idea that you battle an unstoppable evil, which is the devil effectively.” That’s not something I expected to hear at this hearing, but that was Sarah Bond, head of Xbox creator experience, explaining Diablo to Judge Corley.
“It’s literally my father’s favorite game,” says Bond. Judge Corley says it’s “aimed at a certain audience shall we say,” to which Bond replies with, “yes, including my 76-year-old father.”
I hope I’m still playing Diablo at 76.
