Activision Buy Will Make Microsoft 'More Competitive,' Says Its Defense

Microsoft, positioning itself in third place among console gaming companies behind Nintendo and Sony and with “next to no presence” in mobile gaming, is trying to become “more competitive” in the expanding mobile gaming space, it said Thursday.

Microsoft was responding to the FTC’s Dec. 8 antitrust complaint (docket 9412) seeking to block the company’s acquisition of video game company Activision for $68.7 billion (see 2212090001).

The mobile space is the fastest growing segment in gaming today, where 94% of gamers spend their time, said Microsoft’s response. Three-quarters of Activision’s gamers, and over a third of its revenue, come from mobile offerings, it said. It claims the purchase of Activision will make the company’s more popular games, such as Call of Duty, more broadly available by putting them on more platforms. The FTC argued that Microsoft’s purchase of Activision would give Microsoft the ability to “withhold or degrade Activision’s content in ways that substantially lessen competition -- including competition on product quality, price, and innovation.”

Microsoft pledged to make games more broadly available on the day the deal was announced, it noted, saying Xbox has agreed to provide Call of Duty to Nintendo, which currently does have the game. The game it offered to Sony was redacted in the response. “The fact that Xbox’s dominant competitor has thus far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers,” Microsoft said, saying antitrust laws should promote, not prevent, consumers having access to “high-quality content in more ways and at lower prices.”

“There is no evidence that Xbox intends to take Call of Duty away from PlayStation” or any platform, Microsoft maintained, saying that paying $68.7 billion for Activision “makes no financial sense if that revenue stream goes away.” Xbox has exclusive games, a “necessary feature of any content business,” but it can’t afford to take Activision’s games exclusive “without undercutting the basic economics of the transaction.” In a redacted comment, it noted the proposal to Sony for keeping Call of Duty on PlayStation would extend for 10 years, an “unheard-of length” for gaming industry contracts.

Microsoft’s past conduct “provides a preview of the combined firm’s likely plans” if it completes the Activision buy, “despite any assurances the company may offer regarding its plans,” alleged the complaint. When Microsoft bought ZeniMax Media, the parent company of Bethesda Softworks, in March 2021, it assured the European Commission during its antitrust review that it “would not have the incentive to withhold ZeniMax titles from rival consoles,” it said. But soon after the EC cleared the transaction, Microsoft made public its decision to make several of the newly acquired ZeniMax titles Microsoft exclusives.

Suggestions that Microsoft’s statement to the EC about ZeniMax were “incorrect,” Microsoft said, saying it has honored existing Sony exclusivity rights and is approaching future exclusivity rights “on a case-by-case basis.” The EC “cleared the transaction ‘unconditionally as it concluded that the transaction would not raise competition concerns,’” it said.

The ZeniMax purchase “has no relevance” to the Activision deal, Microsoft said. It noted that after that deal closed, ZeniMax’s first two games were made exclusive to PlayStation for a year. Three future titles, designed to be played alone or in small groups, will be exclusive to Xbox and PCs, but updates to existing ZeniMax games Fallout 76 and Elder Scrolls Online, designed to be played by “broad communities of gamers,” were released for Xbox and PlayStation. Microsoft also expanded access to multiplayer game Minecraft, it said.