More from FTC v. Microsoft: all the news from the big Xbox courtroom battle
Questioning of Pete Hines is done, and we’re on to yet another Xbox executive. It’s quite a day.
Microsoft is spending a lot of time getting Pete Hines to explain why Activision’s Call of Duty isn’t a direct competitor for the Microsoft-owned games Starfield and Redfall. This includes a little more admission that Arkane’s Redfall wasn’t everything Microsoft hoped for — something Phil Spencer acknowledged after launch.
The FTC is arguing that game exclusivity is an anti-competitive move, but Pete Hines is under friendly questioning from Microsoft’s attorneys now, and he’s making the opposite case: that exclusivity lets you streamline a game. The anticipated Xbox exclusive Starfield, he says, wouldn’t be coming out on September 1st (it’s actually September 6th) if it were also coming out on PlayStation:
“We would not be putting this game out in nine weeks if we were supporting an entire additional platform, in my opinion.”
In an interview with GameSpot in 2021, Pete Hines, Bethesda’s head of global publishing, apologized to PS5 players who won’t be able to play Starfield as it’s exclusive to Xbox. “All I can really say is I apologize, because I’m certain that that’s frustrating to folks but there’s not a whole lot I can do about it.”
The FTC has just questioned Hines about this interview. “It bothered me that they were upset,” says Hines. “I don’t like it when our players are upset over something we do.”
Poor Redfall — first it got panned on virtually every gaming channel on the internet, now it’s an exhibit in the FTC’s case against Microsoft. The FTC calls it a big-budget AAA game that got locked off PlayStation after Microsoft bought its developer Arkane. Pete Hines admits there “might be some differences of opinion” on whether it meets that standard.
In seriousness, this is just a granular distinction about games industry buzzwords. But I will take it as a diss on Redfall, because my god did that game disappoint me.
He and an FTC attorney are currently struggling to nail down whether he reports to Microsoft executive Phil Spencer and when “Bethesda” actually refers to its parent company ZeniMax. Less mind-numbingly, the FTC is pushing Hines on a core piece of its argument: that Microsoft buying ZeniMax/Bethesda led to games getting locked down to Xbox.
We’re on a 15-minute break so it’s time to recap what we’ve heard so far. The FTC’s opening statements largely focused on the main pillars of its case against Microsoft: Xbox exclusives, the Switch is a separate console, and cloud competition concerns.
Microsoft’s opening statements included a bombshell email from PlayStation chief Jim Ryan and an argument that Sony is the main opponent to this deal and wants to protect its console leadership position and revenues. Microsoft also claims its deal is about mobile.
The FTC then called Xbox Game Studios chief Matt Booty to the stand. He explained how Call of Duty could run on a Nintendo Switch, with the FTC arguing it would be a separate game because the hardware is very different to Xbox or PlayStation. A 2019 email from Booty was also discussed where he said “no effing way” to Nvidia putting Microsoft’s games on its GeForce Now service without permission. Microsoft has signed a deal with Nvidia recently to bring its Xbox PC games to GeForce Now and try and appease regulators like the FTC.
Matt Booty says his thinking about keeping Xbox content exclusive has changed since the days of “no effing way” in 2019. (I’m not sure if attorneys are bowdlerizing “fucking,” or if that’s literally what he wrote.) His explanation — in response to a question from Judge Corley — is a commentary on the streaming wars:
“I think we’ve seen that while content is absolutely important to a strategy, it really isn’t a durable advantage that others can enter a field and others can build a content library relatively quickly.”
His example is Disney Plus competing with Netflix — where he argues Disney has been able to ramp up its library quickly. And, obviously, it’s a way to downplay the idea that Microsoft will make Activision Blizzard games exclusive if the deal goes through.
That was the reaction from Xbox’s Matt Booty to Nvidia putting games on GeForce Now without Microsoft’s permission. Microsoft was “not putting our first-party IP on competing streaming or subscription services. No effing way,” in a 2019 email from Booty.
He then went on to recommend in a March 2021 email to Xbox chief Phil Spencer that Bethesda’s games be pulled from Nvidia’s GeForce Now shortly after the acquisition. “We have pulled all Xbox Game Studios titles from GeForce Now, so as to not compete with xCloud,” said Booty. “I would recommend that in the absence of any other plans that we do the same for Bethesda titles.”
Microsoft signed a deal with Nvidia recently to bring its Xbox PC games to GeForce Now and try and appease regulators like the FTC.
Asked why Booty was keen to remove Microsoft’s games from GeForce Now previously, he said he was frustrated at Nvidia. “I was frustrated at the process. We did not have clear deals in place with Nvidia for the use of our IP. They were putting games onto our service in some cases without our permission.”
“We would have to adjust graphics and assets to run on Nintendo platforms,” says Xbox Game Studios chief Matt Booty. This would involve lowering frame rates and less complexity in games like Call of Duty. The FTC argues it would essentially be a new version of the game and that the Switch is separate to “high performance” Xbox and PlayStation consoles.
Booty is the head of Xbox Game Studios and one of many Microsoft executives set to testify on both sides.
“People are moving to mobile,” says Microsoft counsel Beth Wilkinson. Microsoft offers up a breakdown of revenues across the gaming market and 94 percent are playing on mobile phones in a $145 billion mobile gaming market. Wilkinson argues Microsoft buying Activision is an opportunity for a mobile presence with Candy Crush, Call of Duty, and more.
Microsoft’s counsel, Beth Wilkinson, starts with the Xbox maker’s arguments. Microsoft argues Sony has been the leader in the console market and wants to protect its revenues. Wilkinson argues the acquisition will allow Call of Duty to be streamed via the cloud and available on a subscription service.
The FTC will call on two Nvidia executives to testify about cloud gaming and how the company has overcome technical limitations and latency. This is a key argument in the FTC v. Microsoft case, as Microsoft argues cloud gaming is simply an additional feature right now. Microsoft signed a deal with Nvidia for Xbox PC games. “What’s notable is Nvidia initially opposed this transaction, they signed one of the side deals… and then they supported,” says the FTC.
Microsoft wants to include Nintendo Switch in the overall console market definition, but the FTC wants to limit this to just Xbox and PlayStation. “Microsoft routinely looks at a generation 9 market that excludes the Switch,” says FTC lawyer James Weingarten. He also dismisses gaming PCs as they’re “not in the same market” due to price and more.
The FTC’s counsel, James Weingarten, says “Activision makes some of the most important video games in the US” with titles like CoD, Diablo, and Overwatch. “Microsoft and its competitors need triple-A content for its consoles... they license Activision content and pay a premium for it.” Weingarten says the evidence the FTC will put forward over the next few days is “a fraction” of the total that can raise anti-competitive concerns.
The FTC and Microsoft both have around 20 minutes each of opening statements before we move on to witness testimony this morning. We’ll be hearing from Xbox Game Studios chief Matt Booty, Bethesda’s Pete Hines, and Sarah Bond, head of Xbox creator experience.
Microsoft has admitted that most Xbox Cloud Gaming users rely on it to try games rather than stream regularly “as a result of technical limitations.” Microsoft is arguing against the FTC today that cloud gaming is merely an addition right now, rather than its own market. This will be a key part of the FTC vs. Microsoft case.
The FTC vs. Microsoft case is starting this morning and Microsoft is keen to show Xbox is in third place. “Xbox has lost the console wars, and its rivals are positioned to continue to dominate” argues Microsoft in a filing today. It also reveals Xbox had 16 percent share of console sales in 2021 and 21 percent of console install base.
Microsoft is battling a key US regulator here, but the real war looks like it will be Microsoft vs. Sony.
The FTC vs. Microsoft case kicks off today and we’re gradually hearing more about Sony’s opposition to Microsoft’s proposed Activision Blizzard acquisition. In a deposition, PlayStation chief Jim Ryan says that Sony would no longer share confidential details about next-gen PlayStation consoles with a Microsoft-owned Activision. “We simply could not run the risk of a company that was owned by a direct competitor having access to that information.”
The FTC case against Microsoft kicks off on June 22nd and we’re starting to get a better idea of the arguments and exhibits that will form part of the court case. Microsoft is planning to submit a bunch of emails, with one in particular standing out thanks to its subject line: “FW: pettiness from Sony and GameSpots fanboy reviewers.” Wow.
