Sunday, December 25, 2022

Sony leak has potential to blast major hole into FTC's 'case' against Microsoft's purchase of Activision Blizzard: Xbox Game Pass not viewed as competition

I really didn't expect to do a follow-up during the Holiday Season to my previous post, Microsoft's response to FTC lawsuit feels like Candy Crush, Activision Blizzard King's filing more like Call of Duty as deal parties challenge Federal Trade Commission's merger complaint on law, facts, constitutionality. But the following warrants a change of plans.

Yesterday, Insider Gaming reported something that could play quite a role in the various regulatory reviews of Microsoft's acquisition of Activision Blizzard King. According to unnamed Sony-internal sources, PlayStation chief Jim Ryan said at an employee Q&A Microsoft's Xbox Game Pass offering doesn't worry him in the slightest:

"When we consider Game Pass, we’ve sold more [PlayStation 5]s in two years than they have gathered subscribers and they’ve been doing that for 6-7 years. We’re just shy of 50 million subscribers and they are in the low 20s, but there’s more work to do to grow that number."

It's been known for two weeks now that Microsoft's ten-year licensing offer to Sony comes with the option to make Call of Duty available on Sony's subscription service. That one is named PlayStation Plus and may not be Sony's preferred way to monetize premium titles. There are signs of Sony still having a strong preference for the traditional title-by-title distribution model (especially with periodic price increases).

If Mr. Ryan indeed made that statement, participants in the Q&A session will have to testify under oath--if not in the FTC's peculiar adjudicative proceeding, then at least in district court (where a de facto class action is pending and where the FTC would have to seek a preliminary injunction). The truth will come out.

The FTC and other competition authorities should have known all along that Sony--the entrenched market leader in video game consoles--is a pretty bad complainant over this deal. With what Insider Gaming has reported now, regulators may find it even riskier to enter into any kind of public-private partnership with the PlayStation company.