Microsoft Hits Back As Things Heat Up in the Activision Blizzard Acquisition

The Holidays are just days away, but before everyone takes a well-deserved break prior to 2023, Microsoft has responded to the FTC regarding the contentious Activision Blizzard purchase.

Microsoft has published its response to the FTC’s lawsuit regarding the Activision Blizzard acquisition. Similar to Microsoft’s response to the UK’s CMA. The gloves are now seemingly off as Microsoft has pointed out that Sony has been adding “exclusion” terms on deals for third-party games on Playstation for years. This includes titles like Final Fantasy 7 Remake, Final Fantasy 16, Silent Hill 2 Remake, and From Software’s Bloodborne, which will most likely never see the light of day on an Xbox console.

According to Microsoft:


“In addition to having outright exclusive content, Sony has also entered into arrangements with third-party publishers which require the “exclusion” of Xbox from the set of platforms these publishers can distribute their games on. Some prominent examples of these agreements include Final Fantasy VII Remake (Square Enix), Bloodborne (From Software), the upcoming Final Fantasy XVI (Square Enix) and the recently announced Silent Hill 2 remastered (Bloober team).”

Microsoft

It’s odd that the FTC as well as the CMA have taken the position of protecting Sony, which is the market leader, and have been adding exclusionary terms in contracts with third-party publishers, blocking popular titles from appearing on competing platforms. That seems anti-competitive to me, but not to the FTC and CMA apparently.

All in all, it appears that Microsoft is preparing to build a case and fight this in court if the FTC and CMA attempt to block the deal. According to the terms of the merger, Microsoft would owe Activision Blizzard $2 to $3 billion if the deal is blocked by regulators. So it is pretty safe to assume that Microsoft is not just going to give up.

Surprise – 75% of Respondents to UK Regulator Survey Approve Microsoft’s Activision Purchase

Microsoft continues to push forward with its planned acquisition of Activision, despite challenges from regulatory agencies. Today it received some good news from the UK’s Competition and Markets Authority.

The UK Competition and Markets Authority requested feedback from the public on Microsoft’s purchase of Activision Blizzard. The regulatory group reviewed responses from over 2,100 and 75% were in favor of the acquisition.

Below are some of the views expressed by the respondents:

  • Sony and Nintendo are stronger than Microsoft in console gaming, and the Merger will help Microsoft to compete more closely against them.
  • The Merger will not harm rival consoles because Microsoft has made public and private commitments to keep Activision content, including Call of Duty, non-exclusive. The availability of Minecraft on rival consoles shows that Microsoft’s commercial strategy is not to make games exclusive; 1 The CMA received approximately 2,600 emails, but some of these were excluded from our review because they contained abusive content (with no other substantive content), or were blank, unintelligible, stated to be from non-UK consumers, or not in English.
  • It is unlikely that Microsoft would make Call of Duty exclusive due to its multiplayer nature. Making Call of Duty exclusive to Xbox would only create a gap in the market that could be filled by a rival cross-platform shooter game.
  • Call of Duty has competition from a number of other games including Battlefield (Electronic Arts), Grand Theft Auto (Take Two), and FIFA (Electronic Arts).
  • The Merger will push Sony to innovate, such as by improving its subscription service or creating more games to compete with Call of Duty.
  • The Merger is a reaction to Sony’s business model for PlayStation, which has historically involved securing exclusive content or early access to popular cross-platform gaming franchises, such as Final Fantasy and Silent Hill.
  • Microsoft’s plans to add Call of Duty to Game Pass are pro-competitive and will lower the price of accessing games for consumers.
  • Microsoft would not make Activision’s content exclusive to Xbox post-merger because it would lose significant potential revenue from rival platforms.
  • Consumers could revert to buying games on a buy-to-play basis if Microsoft were to raise the price of Game Pass post-Merger.
  • The Merger will lead to more funding and higher-quality games in the industry.
  • The Merger will allow Microsoft to provide Activision with better guidance and leadership, and encourage it to invest more in games other than Call of Duty.
  • The Merger is pro-competitive in the mobile segment because it will create new options for mobile gamers and allow Microsoft to compete against Google and Apple, which are the two dominant mobile platforms.
  • The Merger will not create competition concerns in cloud gaming services because there are other potential competitors, such as Netflix.
  • Some industry participants have said they are not opposed to the Merger.

This is certainly an interesting development and may pave the way for approval of the acquisition in the UK.

Microsoft President Says Sony Is Acting Like Blockbuster Video During the Rise of Netflix

Microsoft President and Vice Chairman Brad Smith has called out Sony’s stance against Microsoft’s acquisition of Activision Blizzard in a The Wall Street Journal op-ed comparing them to the failed video rental chain.


“Sony has emerged as the loudest objector… It’s as excited about this deal as Blockbuster was about the rise of Netflix… Think about how much better it is to stream a movie from your couch than drive to Blockbuster. We want to bring the same sort of innovation to the videogame industry.”

WSJ

It is really starting to appear that Microsft is not going to back down from this acquisition. They have agreed to concessions on the deal in the EU, offering to keep Call of Duty on Playstation for 10 years. Now, according to the New York Post, FTC insiders are claiming that of the four-person panel currently investigating the proposed deal, two may be looking to side with Microsoft. This now splits voting 2-2.

Lina Khan, the Federal Trade Commission chairperson has even floated the idea of suing Microsoft over the proposed acquisition. However, former FTC chairperson William Kovacic told the New York Post regarding a lawsuit to block the merger: “Lina [Khan] would probably not put things in a position for that to take place, so instead of having that vote she would make the motion to approve the settlement.”

So in the end it looks like Microsoft will make concessions for the US, similar to the EU, to keep Call of Duty on Playstation for the foreseeable future, which is really in their best interests anyway.

Looks like Playstation Boss Jim Ryan racked up the frequent flier miles protesting the deal for nothing.

[Source: WSJ & New York Post]

Activision Blizzard Employees Walk Out Following Bombshell Wall Street Journal Report On Bobby Kotick

Activision Blizzard employees have staged a walkout today following a Wall Street Journal report stating CEO Bobby Kotick has known about instances of sexual misconduct at the publisher and its studios dating back to 2018.

The report which follows months of reporting, interviews, and documents obtained by the WSJ claims that Kotick knew of numerous sexual assault and harassment claims at the publisher and its stable of studios for years. The report also states that Kotick did not notify the board of directors of an out-of-court settlement to an employee who accused a supervisor of rape. That is a major no-no. Boards for billion-dollar companies like to know of these things.

Just last month, Kotick agreed to take a massive pay cut down to $62,500 per year until Activision Blizzard’s board feels that diversity, equity, and inclusion goals are met. 

In hindsight, the board may need to reconsider that decision entirely and perhaps seek tougher action against Kotick.

[Source: The Wall Street Journal]

Activision Blizzard CEO Bobby Kotick Takes Pay Cut – Will Probably Be Okay

Activision Blizzard CEO Bobby Kotick

Activision Blizzard CEO Bobby Kotick, who has a net worth in the billions will take a massive pay cut down to $62,500 per year in total compensation the company’s board feels that diversity, equity, and inclusion goals are met. I think he’ll be alright financially, so I wouldn’t worry too much about it.

In a letter to employees, Activision Blizzard states that it is committed to change after multiple sexual harassment and discrimination lawsuits were brought against it. In addition to the pay cut, Kotick states that the company will employ a zero-tolerance harassment policy, waive arbitration in sexual harassment and discrimination claims.

[Source: Business Wire]