We’re now hearing about a November 2021 meeting where Microsoft Xbox leaders had talked to Bethesda about exclusive games.
“Not just new IP but all games going forward? Wow,” says Xbox CFO Tim Stuart during the meeting, referencing a decision from Phil Spencer on Bethesda games. This would obviously differ hugely from the Bethesda deal model.
Canada’s Competition Bureau has written to Judge Corley to correct “factual inaccuracies” in the Microsoft / Activision court filings.
Microsoft had claimed three things its filings:
1 - Every single worldwide regulator that has examined the deal other than the FTC has rejected this theory [that Xbox will take COD away from PlayStation]
2 - As a result of these efforts, all but one foreign regulator to pass on the issue [cloud gaming] has cleared the transaction. The lone exception is the United Kingdom’s CMA.
3 - Ultimately, Lee’s analysis provides no basis to disregard the real world, where Sony has a favorable offer for COD, Xbox has made plain that it wants to provide COD to Sony (and in fact needs to continue to sell to Sony), and regulators around the world all agree that withholding COD from Sony would be unprofitable and is thus not a serious concern.
Canada’s regulator says:
Contrary to the foregoing quotations from the Memorandum, in a videoconference on May 5, 2023, the Bureau communicated to Microsoft and Activision’s Canadian counsel that the Bureau has concluded that the proposed merger is likely to result in a substantial prevention and/or lessening of competition with respect to gaming consoles and multigame subscription services (as well as cloud gaming), and that the Bureau is continuing to monitor the transaction
Xbox CFO Tim Stuart is now discussing five strategy scenarios that Microsoft was weighing up for Bethesda in February 2021, just ahead of the deal closing. They range from number one being fully cross-platform and number five being full Xbox exclusivity.
Full exclusivity would impact the deal valuation and when discussing these options Jerret West, Xbox CMO, said there would be “significant upset” to full exclusivity and there’s an admission that some leaders at Bethesda won’t be happy seeing games being cut from PlayStation.
The FTC is clearly trying to show that Microsoft’s deal models are flexible where they can potentially offset losses.
The FTC has just presented an email between Xbox CFO Tim Stuart and Xbox chief Phil Spencer, where Spencer says Stuart’s investor talk about Bethesda “sure did stir up a lot of stuff. Stuart responds:
Wish we could come out and say we’re taking [Bethesda content] all exclusive at this point.
Spencer responds: “we can’t say that.”
Another email between Stuart and Matty Booty, Xbox Game Studios chief, discusses making Bethesda’s games exclusives and the financial tradeoffs and concerns about valuation. The email mentions Xbox Game Pass subscriber growth, Xbox units, and offsetting these against the losses of taking games exclusive.
The FTC wants to make it clear that Microsoft would be willing to take a financial hit to boost Xbox Game Pass subscriber growth, sell more consoles, and ultimately bring more consumers to its Xbox platform.
We’re now hearing about a Jefferies investment meeting in November 2020 where Tim Stuart talks about not pulling Bethesda games. But the FTC reads out what he said:
We want that content, in the long run, to be either first, or better, or best, and pick your differentiated experience on our platforms. We will want Bethesda content to show up the best on our platforms.
The FTC wants Stuart to explain first, better, and best. He says first could be like Starfield, and FTC says better could mean better resolution? “Resolution is one thing, frame rate one thing. I was being pretty vague.”
Stuart argues that showing up in Game Pass could be a better experience. But Stuart also said previously that “better could be showing up in resolution.” He also said “I suspect you’ll continue to see us push for a first, better, or best approach on our platforms.”
This questioning clearly leans into the FTC and Sony’s concerns that Call of Duty could be “degraded” on PlayStation, or that games could be held back from competitor platforms.
The FTC and Tim Stuart are now discussing financial models for the Bethesda acquisition and Activision Blizzard. For both, Tim Stuart assumed no major changes in platform strategy.
The model for the Bethesda deal assumed there would be “non-Xbox platform revenue.” The FTC lawyer then says Activision required a financial revision, but Stuart doesn’t remember. The FTC brings up an updated forecast from Activision in January 2022, arguing it’s not a small revision. Not clear what triggered the updated forecast, but perhaps a game cancelation or delay. Stuart says it’s “relatively small” in the grand scheme of a 10-year model.
We’re now hearing about a September 16th, 2020 email between Tim Stuart, Amy Hood, Phil Spencer, Satya Nadella, and Jerret West, CMO at Xbox.
Stuart is updating the team about how the Xbox Series S pricing compares to the PS5 on the day of Sony’s pricing announcement. The information the FTC is pointing to in this email is redacted, so it’s not clear what pricing was discussed.
Another email two years later in 2022 is references where Spencer is updating the team about pricing moves from Sony. Stuart was discussing foreign exchange rates and probably discussing a price hike, which Microsoft eventually announced last week.
We’re now talking about the pricing of subscriptions. The FTC references a March email between Tim Stuart, Xbox CFO, and Amy Hood, Microsoft CFO. The email discusses Sony’s subscription pricing, a “Game Pass competitor” after its announcement last year.
The email also includes a table of information and Stuart comparing Game Pass and Sony’s subscription. It’s not clear exactly what the figures are without seeing the table, but Stuart apparently says day and date games are a key differentiator for Game Pass.
The FTC brings up the phrase “dump trucks of money,” as it’s questioning Tim Stuart about Microsoft spending lots of money on gaming content.
FTC: Have you ever heard the amount of money that’s been spent? Like you’ve said, dump trucks of money?
Stuart: I have a friend of work that likes to say dump trucks of money. I referred to him.
