Microsoft Corp.’s acquisition of Activision Blizzard Inc. will deliver a blow to Sony Group Corp’s console business and give PlayStation gamers a “degraded” experience, an executive with the Japanese electronics giant testified, bolstering the US Federal Trade Commission’s claim that the deal would hinder market competition.
“I believe this transaction is bad for competition,” said James Ryan, the head of Sony Interactive Entertainment. His pre-recorded video deposition was played Tuesday in San Francisco federal court for a judge who must decide whether to pause the deal while the FTC’s legal challenge to the transaction plays out.
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.
Ryan said he foresees Microsoft using Activision’s popular Call of Duty title “somehow to damage us,” by potentially excluding the shooter game’s content from the PlayStation through a “full foreclosure or partial foreclosure.”
That will lead to “some kind of degraded experience” for PlayStation gamers who play Call of Duty, Ryan said. Microsoft would use the game to “disadvantage” Sony and drive PlayStation gamers to Xbox services like Microsoft’s game-subscription program Game Pass, he added.
Ryan’s testimony could help the agency’s argument that the transaction will hurt Microsoft’s rivals in the markets for console gaming and cloud gaming, which can allow streaming of games onto PCs and consoles rather than downloading them. Microsoft could shut out Activision games from PlayStation devices, which dominate the console market, the FTC has said.
“Microsoft wants to take gaming into the future by meeting gamers where they are across platforms, while Sony wants to protect its dominant position,” a Microsoft spokesperson said in a statement. “That’s why our leaders have shown up in person to testify about how this merger benefits gamers.”
Sony PlayStation representatives didn’t immediately respond to a request for comment.
Defeating the agency’s challenge would help Microsoft complete its deal and snag the No. 3 spot in the global games market after after Tencent Holdings Ltd. and Sony.
Before Microsoft’s $7.5 billion purchase of ZeniMax Media Inc. in 2020, Sony hoped ZeniMax role-playing games like the Starfield and the upcoming ElderScrolls 6 would be available on PlayStation, Ryan said.
The FTC is presenting Ryan’s testimony, recorded in April this year, to counter Microsoft’s move last week of sharing an email from January last year where Ryan acknowledged in an email that the deal wasn’t “an exclusivity play” to hurt the PlayStation gaming console.
Last week, Microsoft’s Phil Spencer, who heads Xbox gaming, vowed in court that Call of Duty will remain available on PlayStation and said no decision was made on whether Elder Scrolls 6 would be on PlayStation. Spencer sat in court at a table with Microsoft’s attorneys with a deadpan expression as Ryan’s testimony was played on a screen before him.
The FTC has submitted an email exchange from three and a half years ago between Matt Booty, head of Xbox Game Studios, and Xbox Chief Financial Officer Tim Stuart, to try to show that Microsoft planned to use its deep pockets to oust rivals in the gaming market, including Sony.
“We (Microsoft) are in a very unique position to be able to go spend Sony out of business,” Booty said in the December 2019 email. “If we think that video game content matters in 10 years, we might look back and say, ‘Totally would have been worth it to lose,’” $2 billion or $3 billion, “’in 2020 to avoid a situation where Tencent, Amazon, Google or even Sony have become the Disney of games and own most of the valuable content,’” Booty said.
Microsoft said the email predates the announcement of its Activision acquisition by 25 months.
“It refers to industry trends we never pursued and is unrelated to the acquisition,” the company’s spokesperson said.
The case is Federal Trade Commission v. Microsoft Corp., 3:23-cv-02880, US District Court, Northern District of California (San Francisco).
--With assistance from Leah Nylen.
(Updates with statement by Microsoft in seventh paragraph.)
