Tom Warren

Senior Correspondent

Tom WarrenJun 28, 2023

90 minutes until Satya Nadella, let’s recap.

We have a 90-minute break until testimony continues with Microsoft CEO Satya Nadella. There’s an unfolding drama around a Sony document that wasn’t redacted properly, but inside the courtroom we’ve covered testimony from Microsoft’s economics expert Dr. Elizabeth Bailey:

• The Nintendo Switch argument kicks off again for the 1000th time

• Microsoft argues it’s how gamers spend their time that matter

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

• FTC picks apart Dr. Bailey’s opinions

Then we heard from the vice president of Nvidia’s PC business, Jeff Fisher:

• Just listen to how Fisher says RTX 3080 Ti first

• Fisher thinks PC gaming will always be better than consoles

• Nvidia might be a little steamed about Xbox dismissing cloud gaming

We’ll be back at 1:30PM PT with Microsoft CEO Satya Nadella.

Sony’s confidential PlayStation secrets just spilled because of a Sharpie

Tom Warren and Sean HollisterJun 28, 2023

Tom WarrenJun 28, 2023

It’s time for Nvidia’s Jeff Fisher video deposition.

Tie or Ti in a GeForce 4080 Ti? Jeff Fisher at Nvidia has tried to answer that in the past, and the vice president of Nvidia’s PC business is now appearing via a prerecorded video deposition. Nvidia was against Microsoft’s Activision Blizzard acquisition until the Xbox maker struck a deal earlier this year to bring Xbox PC games to Nvidia’s GeForce Now service.

Nvidia’s Jeff Fisher.

Image: Nvidia

Tom WarrenJun 28, 2023

The court has pulled all its exhibits after the Sony redaction mess.

While we listen to Dr. Bailey’s testimony, a storm is unfolding elsewhere in the FTC v. Microsoft case. The court uploaded a document earlier from Sony that included confidential financial information that wasn’t properly redacted. Now all the documents have suddenly disappeared.

It looks like some redacted the documents with a pen and when you scan them in it’s easy to see the redactions. Reporters and Sony’s competition will have downloaded all the documents as they were in the public domain, so the damage is done:

• Horizon Forbidden West apparently cost $212 million over five years with 300 employees

• 1 million gamers play nothing but Call of Duty

• Sony says only one more Call of Duty game was guaranteed to come to PlayStation

Photo by ANTHONY WALLACE/AFP via Getty Images

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