Following the Federal Trade Commission’s (FTC) request for a preliminary injunction to halt the Microsoft/Activision Blizzard $68.7 billion merger, Microsoft’s legal team has submitted a strong defense. The defense points out that even Jim Ryan, the boss of PlayStation, was confident that Call of Duty would not become exclusive to Xbox consoles.
While the exact quote from Ryan remains redacted, the context suggests his stance on the matter. However, since the statement was private, there is no way to verify Microsoft’s claim.
First and foremost, Microsoft’s defense highlights the lack of evidence supporting the FTC’s central theory that Xbox intends to remove Call of Duty from PlayStation. The FTC fails to present any documents or witnesses suggesting such a move. Conversely, Jim Ryan, the CEO of Sony Interactive Entertainment (SIE) and a chief opponent of the merger, privately expressed a different sentiment on the day of the announcement [redacted].
Even if Ryan’s alleged statement were true, it would contradict Sony’s strong opposition to the merger, which largely stemmed from fears of losing Call of Duty on PlayStation. In a submission to the Brazilian regulator, Sony argued that the highly coveted first-person shooter franchise would be irreplaceable.
It is worth noting that Ryan previously rejected Microsoft’s initial offer to extend the presence of Call of Duty on PlayStation platforms for three years, deeming it inadequate. Subsequently, Microsoft extended a 10-year deal to release Call of Duty on various platforms, including Steam (which did not sign it), Nintendo (which signed it), and Sony (which rejected it).
Microsoft’s defense also emphasizes that every regulator worldwide, except for the FTC, has dismissed the theory of competitive harm in the console market.
Withholding Call of Duty would harm Xbox as it contradicts the valuation the Board relied on when approving the merger, assuming profits from ongoing PlayStation sales. It would also sever a highly lucrative revenue stream for Microsoft and result in a less enjoyable gaming experience for Call of Duty players, who thrive through cross-platform play. Unsurprisingly, every global regulator that has examined the deal, including the European Union and the UK’s Competition and Markets Authority (CMA), has rejected this theory.
Unlike the CMA, which primarily focused its opposition on the cloud gaming market, the FTC initially sought to block the merger based on its potential harm to the console market. Microsoft argues that even if, in the future, Call of Duty were to be removed from PlayStation after the 10-year deal expires, it would have minimal impact on the console ecosystem’s current dominance. Additionally, Microsoft asserts that no court would obstruct a merger solely to protect the position of a dominant player.
Other points raised by the defense highlight the thriving success of platforms like Nintendo Switch and Valve’s Steam, which have operated without Call of Duty for years. This evidence suggests that the franchise is not essential for competing in the gaming market, contrary to PlayStation’s claims. Microsoft’s lawyers also emphasize their focus on the mobile gaming market, currently the largest, followed by PC, while consoles represent a smaller portion. They refer to recent comments made by Sony CEO Kenichiro Yoshida as further proof of the cloud gaming market’s limited significance.
The case will be heard in the Northern District of California, San Francisco Division, before Judge Jacqueline Scott Corley, commencing on June 22nd.
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Eugen Boglaru is an AI aficionado covering the fascinating and rapidly advancing field of Artificial Intelligence. From machine learning breakthroughs to ethical considerations, Eugen provides readers with a deep dive into the world of AI, demystifying complex concepts and exploring the transformative impact of intelligent technologies.
