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Tom Warren

Tom Warren

Senior Correspondent

Senior Correspondent

    More From Tom Warren

    Tom Warren
    Tom Warren
    Nadella commits to shipping Call of Duty on PlayStation.

    Microsoft lawyer: Will Microsoft forego sales of Call of Duty on PlayStation by withholding access?

    Nadella: It makes no economic sense or no strategic sense. Our goal with Activision in particular, in their content and our content, is to get it on more platforms. That’s what we’ve done with Office and that’s what I want to do with gaming

    Microsoft: Will you commit to continue delivering Call of Duty on PlayStation?

    Nadella: 100 percent

    Microsoft’s lawyers have nothing more to ask. Nadella’s questioning was light work from both the FTC and Microsoft today.

    Tom Warren
    Tom Warren
    Does cloud take away from consoles?

    Nadella talks about cloud gaming as expanding gaming to more platforms:

    One mechanism we wanted to use was cloud streaming as a way to bring more competition to mobile platforms and bring sort of more opportunity for more publishers even so that has been a goal

    Tom Warren
    Tom Warren
    Nadella wants to get rid of exclusives, but Sony.

    The FTC’s questioning was fairly lightweight there, and we’re on to Microsoft’s own lawyer talking to Nadella. He talks about exclusives:

    If it was up to me I would love to get rid of the entire exclusives on consoles, but that’s not for for me to define especially as a low share player in the console market. The dominant player there [Sony] has defined market competition using exclusives, so that’s the world we live in. I have no love for that world.

    Tom Warren
    Tom Warren
    The FTC and Nadella keep looking at confidential documents.

    It’s hard to understand exactly what the FTC and Nadella are looking at right now, but it appears the FTC is showing Microsoft’s cloud strategy and its cloud gaming competitors. We might find out more about this once the redacted evidence is available.

    Either way, the FTC is digging into Microsoft’s internal targets and strategy for cloud gaming here.

    One particular email includes a conversation from November 2022 between Kareem Choudhry (xCloud chief), Sarah Bond, and Nadella and it references converting users to Game Pass.

    Tom Warren
    Tom Warren
    Nadella’s email about making cloud mainstream.

    The FTC reads a document from Microsoft saying it “continues to lead in the fast growing gaming cloud gaming market.” Nadella says:

    As a software company, I always think software-first, so I always want to be able to work on all platforms.

    Nadella is now looking at an email where he discusses Microsoft’s “north star vision” for cloud gaming with Xbox chief Phil Spencer.

    Another email about Meta’s quest event, where Microsoft was part of the launch of a new VR headset and promised to bring Teams and other software to the device

    I want to make it clear to the world that Microsoft is focused on cloud-first approaches. Teams, Windows 365, xCloud as the future... I want to basically use every opportunity to make cloud streaming more mainstream.

    Tom Warren
    Tom Warren
    Nadella says cloud gaming includes Xbox Live.

    The FTC moves on to ask Nadella about cloud gaming and how it can be used on TVs. “Cloud streaming can essentially transcend any device but that’ll be one use case,” says Nadella.

    I don’t think of it as strictly substitute for the console. I mean, at least the market feedback to date has been people love their consoles, people love their PCs, people love their phones and use cloud gaming as an adjunct.

    Nadella says it’s “possible” for cloud gaming to become a breakthrough market, but that it’s not something that has happened yet.

    Nadella says streaming is a “minor” part of his definition of cloud, which also includes Xbox Live:

    Just to make sure that it’s clear. Whenever I think about the cloud in the context of the Xbox pillars of content, cloud, and community, Xbox Live is part of the cloud. So even when you’re thinking about a console or a PC, the cloud is actually very integral to the experience. So it’s not just streaming alone when I think about the cloud.

    GERMANY-VIDEO-GAMES-FAIR-GAMESCOM
    Photo by INA FASSBENDER/AFP via Getty Images
    Tom Warren
    Tom Warren
    FTC highlights Microsoft’s gaming targets.

    FTC is now referring to Nadella’s own self-assessment, which includes a senior leadership team (SLT) metric to track performance of top Microsoft leaders.

    There’s also an SLT metrics slide for Microsoft’s gaming business, with a series of footnotes for the metrics. The document is confidential, and highlights Microsoft’s target for the gaming business and it’s actual achievement.

    FTC: Microsoft exceeded its metric for the gaming business, is that correct?

    Nadella: Yes, we set it low

    The FTC is now digging into Nadella’s compensation.

    Evidentiary Hearing Held In San Francisco As FTC Seeks Injunction In Microsoft And Activision Blizzard Merger
    Nadella appears at court for FTC v. Microsoft.
    Photo by Loren Elliott/Getty Images
    Tom Warren
    Tom Warren
    FTC quizzes Nadella on Xbox market share.

    Nadella is now looking at evidence the FTC is submitting. It’s a presentation about Xbox Series S / X consoles, and how Microsoft took share for two quarters in a row, and how Microsoft was the market share leader in the US, Canada, UK, and Western Europe.

    Another document says Microsoft “sold more consoles life today than any previous generation of Xbox One” and was “the market share leader in North America for three quarters in a row among next-gen consoles.”

    Nadella confirms that was all accurate.

    Tom Warren
    Tom Warren
    FTC is questioning Nadella first.

    The FTC’s lawyer is questioning Nadella first, before Microsoft’s lawyer will also speak to Nadella. We’ll likely hear Judge Corley asking Nadella questions, too.

    Nadella is largely confirming facts about Microsoft’s senior leadership team and earnings calls right now.

    Tom Warren
    Tom Warren
    Microsoft also had some redacted document issues.

    We weren’t supposed to know Microsoft was looking to acquire Bungie, Sega, and others. After the court in FTC v. Microsoft cleared the documents following the Sharpie incident, it only has one document remaining that includes Microsoft’s acquisition targets.

    It’s now heavily redacted compared to the version we saw the other day. There’s no more final “watchlist” for potential acquisition targets. Oops.

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