Today marked the first day of the evidentiary hearing that sees Microsoft and Activision fight in court against the FTC's demand for a preliminary injunction that would severely hinder the proposed acquisition.
Microsoft reached out to TechRaptor with a statement signed by a company's spokesperson that summarizes its position following the hearing, and it clearly points the finger at Sony, accused to be lobbying to preserve its dominant position in the market while knowing all along that Microsoft would keep Activision's games on PlayStation.
Today showed Sony has known all along we’ll stand by our promise to keep games on its platform and made clear its work to lobby against the deal is only to protect its dominant position in the market.
This follows the reveal during the hearing (via FOSSpatents Bog founder Florian Mueller and Mlex's Michael Acton) of an email signed by Jim Ryan in which he reassured stakeholders that he believed that the acquisition of Activision Blizzard was "not an exclusivity play at all," that Call of Duty would be on PlayStation for many years to come that Sony would be fine.
This starkly contrasts with Ryan's complaint to the British CMA involving the fear of receiving a degraded version of Call of Duty, going as far as alleging that such an occurrence would seriously damage Sony's reputation to the point that its business would never recover.
Ryan has not yet commented on this discrepancy and we don't know whether he will, as his deposition at the upcoming hearings is scheduled to be a pre-recorded video.
During the hearing, Microsoft and the FTC argued about the definition of the market, with the FTC aiming to restrict it to Xbox and PlayStation, excluding Nintendo and PC. The regulator also argued that cloud streaming and multi-game subscriptions can be considered as a single market for the sake of competition.
The regulator also alleged that Microsoft doesn't need a full foreclosure to hurt its rivals, but could use partial foreclosure instead.
Further depositions today included Head of Xbox Game Studios Matt Booty, Corporate Vice President of Xbox Gaming Ecosystem Sarah Bond, and Bethesda Softworks Head of Publishing Pete Hines.
Booty was questioned about correspondence written in 2019 in which he appeared to describe a possible foreclosure of Sony from the market. He described it as a "thought experiment" at a time in which Microsoft believed content would represent a durable advantage. This is no longer true. Booty also explained that Microsoft was initially frustrated with the process required to put games on Nvidia's GeForce Now, but now the relationship between the two companies has changed considerably.
Hines testified that Sony never complained and even responded positively to the quality of the PlayStation versions of Bethesda's games after the acquisition. He also explained that the games by Bethesda that won't be released on PlayStation have a very different profile compared to Call of Duty.
We also heard that Bethesda had an agreement with Disney for a multiplatform release of the Indiana Jones game by MachineGames, but that was renegotiated post-acquisition to be only on Xbox and PC, including GamePass. Hines also explained that the original deal was signed as a small independent publisher which is very different from being part of Microsoft.
Bond talked about the long-standing marketing agreements Sony had with Activision, imposing "very clear limits" to what Microsoft could do with the franchise. We also hear that the purpose of the agreement with Nintendo is to emphasize Microsoft's commitment to the cross-platform availability of Call of Duty, including both existing ones and new ones. Bond also explained that Valve did not sign a similar agreement as they don't want to sign contracts that lock up content over ten-year periods of time. They have never signed similar agreements and believe should earn the developers' business. Ultimately, they don't need the deal as they believe Microsoft's commitment to keep the games on Steam.
The FTC has recently obtained a temporary restraining order against the acquisition until the federal court rules on the possible preliminary injunction, and the evidentiary hearing will possibly last until June 29.
Interestingly, the case is handled by the same Judge who denied a preliminary injunction in the so-called "Gamer's Lawsuit." Yet, this doesn't mean that she will come to the same conclusion this time around.
On the other side of the Atlantic Ocean, Microsoft's appeal against the British CMA's decision to block the acquisition is ongoing, with the hearing starting on July 28.
Recently, the European Union approved the deal including proposed remedies to level the competitive playing field on the cloud market, which Microsoft agreed to. A few weeks ago, we learned that the deal was approved by the Chinese authority, while earlier this week, South Korea's regulator also cleared the deal, bringing the number of countries that officially cleared the acquisition to 38.
A couple of days ago, the authority of New Zealand asked for further information addressing its possible concerns on the case in order to come to a conclusion in mid-July.
In an interview published a few days ago, Activision Blizzard CEO Bobby Kotick mentioned that Microsoft is “by far the best place" for the publisher, adding that the acquisition is "the right thing for the industry."
