Tom Warren

Senior Correspondent

Tom WarrenJun 28, 2023

FTC wants to know Dr. Bailey’s opinion on product markets.

The FTC wants to pick apart Dr. Bailey’s analysis here and confirm antitrust product markets and whether she made a hypothetical monopolist test:

FTC: You’re not offering an opinion on what the correct product market actually is in this case?
Bailey: I think that’s right. I think my opinions are around the data-driven evidence but also the documents and testimony that I’ve seen that speak to the relevant markets as Dr. Lee defined.
FTC: You never completed a hypothetical monopolist test, right?
Bailey: The hypothetical monopolist test is one way to think about identifying where that nexus of competition is. So all of the analysis that I’ve talked through yesterday, and the ones I talked to you now... they speak to substitution and gamer behavior, and that speaks to the nexus of competition.
FTC: You didn’t actually perform the test?
Bailey: I’m not sure what you mean by that. There’s many ways to perform that test, the work that I did speaks to that.
FTC: The term hypothetical monopolist test appears five times in your report. Each of those is in reference to the hypothetical monopolist test.
Bailey: I disagree that Dr. Lee did a hypothetical monopoly test. He says he did a critical loss test and he transforms that language into saying an aggregate diversion ratio and and I disagree that that’s what he did

Tom WarrenJun 28, 2023

How many Xbox Game Pass Ultimate users actually use cloud gaming?

This is a key point for Microsoft, especially given the Competition and Markets Authority (CMA) in the UK appears to have counted all Game Pass users as cloud users.

Xbox Game Pass Ultimate includes Xbox Cloud Gaming, but Dr. Bailey claims not many people used it:

What I found was that of those Game Pass ultimate gamers, a very small fraction of them access the cloud gaming feature. Their proportion of game time hours through cloud gaming are even smaller. When they access that cloud gaming feature, the overwhelming majority of them are accessing it at least once through a console

This aligns with what Xbox’s Sarah Bond testified that most Xbox Cloud Gaming users are using the service to try games before they download them. Judge Corley cuts in to ask if it aligns with Bond’s testimony and Dr. Bailey agrees.

Tom WarrenJun 28, 2023

Microsoft argues it’s about how gamers spend their time.

Dr. Bailey points out that her data suggests it’s where gamers spend their time that matters, not the hardware. The FTC doesn’t count PCs into the console market, but Microsoft is trying to point out here that they still compete because they both largely play the same games, especially an Xbox.

“What I’m showing here in my report... these are the the top 15 games that are played on Xbox and on PlayStation. You can see all of those top 15 games are also available for play on PC,” says Bailey. “Many gamers multi-own, they already have a PC. It’s a large percentage.”

Tom WarrenJun 28, 2023

Mark your bingo card, it’s Nintendo Switch argument time.

It’s day four and it only took a couple of hours and Microsoft is back on the Nintendo Switch beat.

Dr. Bailey says she has analyzed data of the 10-week period that the Switch launched. She found a decline in the number of gamers on Xbox and PlayStation console and game time hours.

The FTC and Microsoft argue about the Switch every day because the FTC doesn’t want to count the Switch as a competitor to Xbox, but Microsoft argues it is. Dr. Bailey’s analysis shows that the Switch has an affect on gamer attention and where they spend their hours.

If Switch is included in the global console market, Dr. Bailey says “no matter which metric we use, Xbox is the third place” and has been for the last five years.

Tom WarrenJun 28, 2023

Dr. Elizabeth Bailey returns.

Dr. Bailey’s testimony got cut short yesterday as we reached the end of day three, but she’s back for day four. We’re going to get to hear the FTC’s lawyer pick holes in her economic assessment of Microsoft’s Activision Blizzard deal and why she doesn’t think Call of Duty is an essential game.

Tom WarrenJun 28, 2023

15-minute break so it’s our mission to recap the Call of Duty situation.

We’re nearing the end of Activision CEO Bobby Kotick’s testimony, but we have a 15-minute break to let the court reporter relax for a moment (I feel your pain!). Let’s recap what we’ve heard from Kotick so far:

• How does Activision make a Call of Duty game every year?

• Kotick regrets not bringing Call of Duty to Switch

• Will Microsoft make Call of Duty suck on PlayStation?

• Activision isn’t currently interested in Xbox Game Pass

• But why isn’t Activision into subscription services?

• Why did Activision remove games from GeForce Now?

• The future of Call of Duty on Switch

Tom WarrenJun 28, 2023

Big testimony from Kotick over Call of Duty on the Nintendo Switch.

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.

Tom WarrenJun 28, 2023

Why did Activision remove games from GeForce Now?

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.

An array of devices on a table, all displaying the Nvidia GeForce Now streaming service.

Image: Nvidia

Tom WarrenJun 28, 2023

Activision looked at Game Pass in 2020.

The FTC reveals Activision was looking at putting its games on Xbox Game Pass in 2020, but “we made a decision not to include our games on Game Pass as a subscription service.”

The FTC is catching Kotick out with his previous testimony as he’s being evasive here at answering questions he’s previously discussed in his investigational hearing.

Judge Corley cuts in:

Judge Corley: Why did you agree to the merger if you don’t think [game subscriptions] make commercial sense?
Kotick: I don’t agree with the idea of a multi game subscription service as a business proposition going forwards, but we [Activision and Microsoft] can agree to disagree.

Image: Microsoft

Tom WarrenJun 28, 2023

FTC pushes Kotick on multi-subscription services.

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.”

Tom Warren

Senior Correspondent

Senior Correspondent

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Tom Warren

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