Following the FTC’s request for a preliminary injunction against the closing of the Microsoft/Activision Blizzard $68.7 billion merger, Microsoft lawyers have submitted their defense, alleging (among many other counterpoints) that even PlayStation boss Jim Ryan was immediately sure Call of Duty wouldn’t have been made exclusive to Xbox consoles.
While the exact quote Ryan reportedly said is redacted, the context is abundantly clear. Of course, since the statement was private, there is no way to know whether Microsoft is telling the truth here.
First, there is no evidence to support the FTC’s central theory that Xbox will take COD away from PlayStation. The FTC does not cite a single document or witness even suggesting this will happen. On the contrary, Jim Ryan, the CEO of Sony Interactive Entertainment (“SIE”) and the chief commercial opponent of this deal, said privately on the day it was announced [redacted].
Still, assuming that could be true, it would be a stark contrast to Sony’s fierce opposition against the merger that primarily hinged on the potential removal of Call of Duty from PlayStation. In a document submitted to the Brazilian regulator (which later approved the merger without requesting any concessions), Sony claimed that Activision’s prized first-person shooter franchise would be irreplaceable.
Jim Ryan himself once rejected Microsoft’s initial offer to extend the presence of Call of Duty on PlayStation platforms for three years as inadequate on many levels. Later, Microsoft offered a 10-year deal to release Call of Duty on multiple platforms, such as Steam (which didn’t feel the need to sign it), Nintendo (which signed it), and Sony (which rejected it).
This is, of course, noted by Microsoft’s lawyers, who also highlight that every single regulator in the world has rejected the theory of competitive harm for the console market.
Withholding COD would harm Xbox. It would contradict the valuation the Board relied on in approving the deal, which assumed profits from continued PlayStation sales. It would cut off a highly lucrative income stream to one of Microsoft. And it would make COD a worse game and enrage the gaming community, because much of the game’s popularity stems from the way it brings together players who use competing consoles. It is therefore unsurprising that every single worldwide regulator that has examined the deal other than the FTC has rejected this theory—including both the European Union and the UK’s Competition and Markets Authority (“CMA”).
Unlike the CMA, which has focused its blocking efforts on the cloud gaming market, the FTC had originally sued to block through its internal proceedings primarily based on the theory that the merger would harm the console market, and it now has to continue walking that road.
Microsoft goes on to say that even if at some point in the future (e.g., after the 10-year deal offers) Call of Duty was ever removed from PlayStation, it would at most put a small dent in the console ecosystem’s current lead, and no court would block a merger to protect a dominant player’s position.
Additional points made by the defendants include that platforms like Nintendo Switch and Valve’s Steam have thrived without Call of Duty for years, evidence that the franchise is not at all essential to compete in the gaming market, unlike what PlayStation tried to assert. Moreover, Microsoft noted (as mentioned by Phil Spencer in the past) that its primary drive to finalize the merger is the mobile market, which is now the largest gaming market, with PC in second place and consoles a distant third in size. As expected, Microsoft’s lawyers also mentioned the comments shared recently by Sony CEO Kenichiro Yoshida as evidence against the current importance of the cloud gaming market.
The case will be discussed in the Northern District of California, San Francisco Division, before the honorable Judge Jacqueline Scott Corley, starting on June 22nd.
