More from FTC v. Microsoft: all the news from the big Xbox courtroom battle
The FTC is now pushing Bobby Kotick on mobile and Switch games, like Call of Duty mobile. Activision partnered with Tencent because Kotick admits “we couldn’t make that game on our own at the time.”
The FTC is arguing here that Activision doesn’t have the experience to make Call of Duty on mobile, so why would Microsoft be able to create a version for Switch?
Kotick responds:
Literally from a high level they could evaluate what would be required or they could envision a game that they might make on Switch.
The FTC then reveals Kotick only found out about the Nintendo Switch version of Call of Duty from news reports, and that the agreement also purports to bring a future Call of Duty game to a future Nintendo console.
We would consider it once we had the specs, but we don’t have them at present. We missed out on the opportunity for this past generation of Switch, but we’d have to wait until the specifications. We don’t have any present plans to do so.
But in Kotick’s previously testimony he says:
I actually think we will likely make a Call of Duty game for a new Nintendo console. I can’t tell you there are specific plans, but I can tell you it’s something we’d consider.
Judge Corley intervenes. “If the merger doesn’t go through, you said you made a mistake with the Switch, you’re not going to make that mistake again. What would be a reason not to?
If we didn’t have the resources and there was something wrong with the specifications
Judge Corley: So you’d like to be able to put Call of Duty on the Nintendo Switch?
I think we would consider it and if it was something where we could make a great game we’d likely consider it.
Kotick discusses the removal of Activision games from GeForce Now after the brief beta period. “When they [Nvidia] launched the service commercially we removed our titles,” says Kotick. It sounds like Activision wanted a commercial deal with Nvidia or the games would disappear.
In an internal Activision 2020 email, Kotick discusses a potential commercial agreement to bring Activision games back to GeForce Now. The email is full of talking points for a meeting with Bobby Kotick and Nvidia CEO Jensen Huang.
Kotick says he never used the talking points, but the FTC is painting a picture here that Activision would put its games on subscription services and cloud services if the price was right, if it could negotiate favorable commercial terms.
FTC points out that Activision’s core business is making games. It doesn’t make a console, doesn’t have a subscription service like Xbox Game Pass, and doesn’t offer a cloud streaming service. What this all means is Activision has the incentive to be everywhere.
FTC: Activision hasn’t signed deals to offer COD first on other platforms, right?
Kotick: It’s possible.
FTC points out that Activision hasn’t made a formal decision about not putting its games on subscriptions. “We’d evaluate,” says Kotick and that Activision has experimented. “Generally speaking I don’t believe that a multi-subscription service for games is the best way to enable players to make their investments.”
FTC points out that in previous testimony Kotick mentioned some themes are on Sony’s subscription service and that no formal decision had been made to offer other content.
Kotick agrees there could be a strategic reason to offer content on game subscriptions “for a small duration of time, but not something sustainable.”
The FTC’s lawyer is now questioning Kotick.
The FTC points out that Call of Duty was the “number one selling console game” for 13 years in a row. Kotick confirms this is correct. He also confirms Call of Duty Modern Warfare II made $1 billion within 10 days of launching in 2022. It was also the highest grossing entertainment opening, that includes games, TV, and movies, but Kotick says it’s more comparable to box office figures.
FTC points out there aren’t other console games that have had a more successful launch. “I think we’ve generally been the most successful of those games,” says Kotick.
FTC points out that Call of Duty: Vanguard was a rare disappointment for Activision. “It was disappointing in the commercial results,” says Kotick. But it was still the number one selling game for consoles in 2021.
Activision CEO Bobby Kotick isn’t currently interested in Xbox Game Pass or subscription services:
“I have a general aversion to the idea of multi-game subscription services, maybe part of it is being in Los Angeles and having large, big media companies move their content to these subscription streaming services and the business results have suffered.”
He confirms he wouldn’t put Call of Duty on a subscription service and that currently Activision is generating no revenues from these kind of services. Kotick also says the company has “experimented with a few streaming services,” but has no plan to put games on streaming services.
Judge Corley intervenes and wants to know why would anyone pay $15 a month for World of Warcraft instead of $70 for a game?
“It was developed almost 20 years ago, and it’s a really rich experience where we’re playing for longer hours than most and historically what we’ve done is the content that you wouldn’t have to necessarily pay for so you pay $15 so you can access the content over time.”
Activision CEO Bobby Kotick discusses Sony’s claim Microsoft could degrade Call of Duty on PlayStation:
“You’d vitriol from gamers that would be well deserved. People who make video games have great pride in the work they do.”
Microsoft’s lawyer points out there are “different maps and weapons” on platforms and Kotick says not having these isn’t degrading a game and it’s marketing. Sony currently has a marketing deal with Activision for Call of Duty.
“I made a bad judgment,” says Activision CEO Bobby Kotick about not bringing Call of Duty to the Nintendo Switch. He says he thought Nintendo was trying to do too much with the Switch and that it wouldn’t be a success.
“It’s probably the second biggest video game system of all time,” says Kotick, with deep regret.
A new exhibit has just dropped and it’s full of important financial data that has been marked out with a black pen. Unfortunately that doesn’t keep it secret once you scan it in, and oops everything is no longer secret.
“You’d alienate 100 million monthly active players,” says Activision CEO Bobby Kotick.
“You would have a revolt if you were to remove the game from one platform. Gamers are incredibly passionate, you get invested in the experience... it’s like a sport.”
A new version of Call of Duty arrives pretty much every year, and EA’s Medal of Honor inspired the game. “People at Activision were playing it,” says Kotick. It provided endless conflicts in history to build yearly releases. “We had to instill a compensation and reward system to keep people motivated to work on sequels,” says Kotick.
Activision Blizzard CEO Bobby Kotick discusses the game business and how he bought Activision when it was insolvent more than 30 years ago after it had “lost its way.”
He’s now talking about how gaming is different to movies and TV. “The business is much more about you experiencing something and feeling like you’re taking action,” says Kotick.
He also discusses Sony:
“Sony is an extraordinary consumer electronics company... they invented the Walkman, co-invented the CD, they’re one of the great pioneers and companies.”
Wednesday’s hearings begin with yet another executive: Bobby Kotick, who’s so far appeared only in conversations and messages referenced by other witnesses. Kotick will presumably be asked about these conversations, like a meeting where PlayStation’s Jim Ryan reportedly told him “I just want to block your merger.”
We’re about to get started with Activision Blizzard CEO Bobby Kotick in around 10 minutes. We’re expecting that Dr. Bailey’s testimony will resume after Kotick, with questions from the FTC.
Microsoft CEO Satya Nadella will appear in the afternoon, likely at around 1:30PM PT / 4:30PM ET. We’ll also hear from Nvidia’s Jeff Fisher briefly and Microsoft is also calling Dr. Dennis Carlton, another economics expert.
FTC v. Microsoft day three was all about Sony’s objection to the Activision Blizzard deal, its bet against Game Pass, and a cloudy future.
This is the big one. Activision CEO Bobby Kotick will take the stand this morning, followed by Microsoft CEO Satya Nadella at around 1:30PM PT / 4:30PM ET.
We’ll also hear from Nvidia’s Jeff Fisher briefly and Microsoft is also calling Dr. Dennis Carlton, another economics expert, to pick holes in Dr. Lee’s report.
Day four begins at 8:30AM PT / 11:30AM ET, and we’ll be following along live right here.
That’s it for day 3 of FTC v. Microsoft. Activision CEO Bobby Kotick will testify in the morning tomorrow at 8:30AM PT, after which we’ll resume Dr. Bailey’s testimony. Microsoft CEO Satya Nadella will testify at around 1:30PM PT too.
Let’s recap Nvidia’s Phil Eisler:
• Activision games were available on GeForce Now beta and Call of Duty was one of the most popular
• Nvidia is understandably happy with its Microsoft agreement
Let’s recap Dr. Bailey:
• Dr. Bailey claims Call of Duty isn’t essential
• Dr. Bailey has analyzed telemetry data from Xbox and PlayStation
• Call of Duty isn’t uniquely important, apparently
Don’t forget to check out our recap of PlayStation chief Jim Ryan’s testimony and the FTC’s economic expert, Dr. Robin Lee.
Big day ahead tomorrow with live testimony from Microsoft and Activision CEOs. We’ll be back here at 8:30AM PT / 11:30AM ET.
Microsoft wants to paint Call of Duty as not all that important, because gamers play plenty of other games. Dr. Bailey says there are a “good percentage of gamers” who are playing more than 10 franchises on PlayStation.
Dr. Bailey also looked at whether Call of Duty players spend more money, something that came up in Dr. Lee’s report. We only have an audio feed here so it’s difficult to know what data is being show, but there are comparisons between Call of Duty and God of War Ragnarök. Both games have been bundled with consoles.
Dr. Bailey argues that how often a game is played on a first day is a proxy to how important the game is, but she’s not aware of different game bundles in different US states. That could be a hole in the telemetry analysis here.
“Call of Duty is an important game and it’s a popular game, but there’s nothing to suggest it’s... uniquely important,” says Dr. Bailey. She’s also looked at the Nintendo Switch being successful without Call of Duty. Switch share has grown 35 percent without Call of Duty, Dr. Bailey says.
Dr. Bailey has been given access to key telemetry data from both PlayStation and Xbox for Call of Duty. Microsoft argues that data for market share and usage shouldn’t be limited to just the US and that it should be global. “It reinforces that nexus of competition and competitive decisions are made not global, nor local or limited to the United States,” says Dr. Bailey.
Dr. Bailey was able to analyze game time to determine if the same games are popular in the US and other parts of the world. “If you look at the most highly played games that set of games that are most highly played in the US is a very similar set the most highly played games in other countries around the world,” says Dr. Bailey.
Dr. Bailey also confirms that Dr. Lee also had access to the same telemetry data.
We’ve heard Microsoft argue that its Activision Blizzard acquisition is mainly about the opportunity in mobile. Now Dr. Bailey is being questioned about the mobile market.
“Mobile is the largest, it’s about 70 percent” of the overall $150 billion gaming market. PC gaming is around $33 billion, console gaming at $28 billion. Xbox is “less than half a percent of mobile gaming revenue,” says Dr. Bailey. “Activision Blizzard is also very small in mobile gaming. So combined, they’ll have 3.8 percent of mobile gaming.”
Dr. Bailey says “Call of Duty is not essential, critical, or must-have. It’s not a unicorn.”
That’s the opposite of what we heard from Dr. Lee earlier, and even Judge Corley described Call of Duty as a unicorn previously. Dr. Bailey says Dr. Lee’s markets are “too narrow” and that the merger will expand the reach of content.
Microsoft has now called Dr. Elizabeth Bailey as a witness, an economics expert at Charles River Associates. We’re going to get Dr. Bailey’s economic opinion of Microsoft’s Activision Blizzard acquisition.
Microsoft’s lawyer asks Phil Eisler, who leads the GeForce Now team at Nvidia, about its agreement earlier this year for Xbox PC games on its streaming service:
“The agreement entitles us to the content provided the transaction completes on the Activision side. We have already begun working with Microsoft to onboard their first-party titles, so we’re confident that will solve our concerns there.”
Activision games were available on GeForce Now during its initial beta period, before being pulled from the service. “We had a number of those [Activision] games on the service at beta,” says Phil Eisler, who leads the GeForce Now team at Nvidia.
“Did Activision agree to make these games available?” asks the FTC. “We worked with a contact at Blizzard, they were supportive of the games being available during beta.” Call of Duty games were also on GeForce Now during beta and were “one of the more popular games on the service.”