Activision Blizzard Inc. will likely abandon a $69 billion takeover bid by Microsoft if the US Federal Trade Commission wins a ruling pausing the deal, the game maker’s chief executive officer told a judge.
Microsoft called Activision CEO Bobby Kotick to testify in San Francisco federal court Wednesday to reinforce its claim that the acquisition won’t hurt competition in the markets for console and subscription-based games. The case represents a major test for the FTC’s ability to block tech deals in court after the agency lost a challenge to an acquisition by Meta Platforms Inc. earlier this year.
US District Judge Jacqueline Scott Corley must decide whether to halt the Microsoft deal — which has a July 18 closure deadline — while the FTC’s legal challenge to the transaction plays out.
“My board’s view is if the preliminary injunction is granted, we don’t see how this deal will continue,” Kotick said.
The FTC argues the deal would harm Microsoft’s rivals, including Sony Corp. For example, Microsoft could exclude Activision games, specifically the popular shooter game Call of Duty, from rival Sony PlayStation devices, which dominate the console market, the regulator has said.
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Kotick pushed back against that argument. Taking Call of Duty out of PlayStation would be very “detrimental to our business,” he said, adding that gamers would “revolt” if the the top-selling title was pulled from any game platform.
He displayed a lack of enthusiasm for putting Activision games on subscription game services, a market the FTC believes will be harmed if the deal is completed.
After Kotick told Microsoft attorney Beth Wilkinson that such services don’t generate revenue for Activision, he was grilled by FTC attorney Jennifer Fleury over whether he’d consider allowing subscriptions for Activision titles in the future.
The judge interjected to ask Kotick why he agreed to the deal with Microsoft that plans to put Activision games on its subscription service Game Pass.
“We can agree to disagree,” on subscription services, Kotick said. The deal was beneficial to his company’s shareholders, he said.
Kotick agreed with Fleury’s estimate that the acquisition would add $408 million to his net worth.
Kotick said said he learned from news reports in December that Microsoft and Nintendo Co. agreed to a 10-year deal to bring Call of Duty to Nintendo platforms, including its hand-held Switch device.
Fleury asked Kotick if he would ever consider making a game for the Switch. The FTC has argued that Microsoft can’t offer the best experience when it takes Activision titles to gamers on platforms that compete with the Xbox.
“I think we could consider it, if we can make a game for it,” Kotick said. He’d earlier told Wilkinson he had previously “made a bad judgment” about the Switch’s capabilities to support Call of Duty. “I didn’t think it was going to be wildly successful,” he said.
The case is Federal Trade Commission v. Microsoft Corp., 3:23-cv-02880, US District Court, Northern District of California (San Francisco).
(Updates with additional Kotick testimony)
