PlayStation boss Jim Ryan says game publishers are “not happy with Xbox Game Pass”. He did so during the lawsuit with which the FTC wants to block Microsoft’s acquisition of Activision. Several economic experts also spoke, in addition to the head of Nvidia GeForce NOW.
“I’ve spoken to all the publishers; they are unanimously unhappy with Game Pass because it’s destroying value,” Jim Ryan said during a pre-recorded video interview, according to The Verge. The CEO continues that Call of Duty would not be added to Xbox Game Pass if Microsoft’s intended acquisition of Activision falls through.
Ryan also stated that Xbox Game Pass is not profitable. “The Game Pass business model appears to have some challenges and Microsoft appears to be losing a lot of money on it,” said the CEO. Xbox boss Phil Spencer previously told the media that Game Pass is “very sustainable” and “no cash burn,” though the company doesn’t share hard numbers for that.
The video interview of Jim Ryan, CEO of Sony Interactive Entertainment, was shown on Tuesday night during the lawsuit between Microsoft and the Federal Trade Commission, the US competition regulator. Tweakers previously published a backstory on this process.
Jim Ryan: Activision acquisition ‘not an exclusive Xbox game’
During the hearing, an earlier email from Jim Ryan resurfaced. The CEO said early last year that Microsoft’s acquisition of Activision is not an ‘exclusive game’. “I’m sure we’ll continue to see Call of Duty on PlayStation for years to come,” Ryan wrote at the time. Also during the video debriefing, Ryan said that it would be best if Microsoft continued to release Activision games for PlayStation consoles. However, he declined to say whether it’s important for Microsoft to keep Activision’s cross-platform games. Ryan also declined to say whether he himself would exclude Activision’s titles from the PlayStation if he was in charge of the Xbox. “That’s a hypothetical question I don’t want to answer.”
One of the FTC’s main arguments in its lawsuit is that Microsoft could harm competition by releasing Call of Duty exclusively on Xbox consoles and PCs. PlayStation is also opposed to the takeover and has expressed concerns about it. Phil Spencer has previously stated that Microsoft wants to continue releasing Call of Duty on other platforms, including the PlayStation. He promised the same under oath during the trial.
Ryan further stated that he believes Nintendo is competing in a different market than the PlayStation and Xbox. This is also an important argument of the FTC. This competition regulator claims that Microsoft and Sony are focusing on a market of high performance consoles and that the Nintendo Switch is not included. Therefore, the FTC believes it should not include Nintendo’s market share in its economic forecasts surrounding the acquisition. Microsoft claims that Nintendo is a competitor to the Xbox. The tech giant also says this assumption paints a skewed picture of the market. According to Microsoft, the Xbox has the smallest market share of any console manufacturer, with Sony and Nintendo in first and second place, respectively.
Finally, Ryan said that cloud gaming is not yet a big market. Sony’s PlayStation Now cloud gaming service had three million subscribers before it was merged with PlayStation Plus, but Ryan says cloud gaming won’t be big for several years. “Cloud technology will become an important part of how gamers access games between 2025 and 2035,” said the boss. Ryan also stated that he is not happy with Starfield becoming an Xbox exclusive, but does not see it as “anti-competitive”. The company also wouldn’t share PS6 devkits with Activision if Microsoft acquired that company, because the likelihood of hardware secrets ending up with the competitor is too high.
FTC Economist on Xbox Exclusives and Market Share
On Tuesday night, Dr. Robin Lee speaking. He is an economist for the FTC and has described two different economic models surrounding the Activision acquisition. The first model measures the total sales of the previous generation of consoles: the PS4 and the Xbox One. Lee then attempted to predict how market share would change if Microsoft excluded the Call of Duty series from the PS4 in favor of the Xbox One. According to Lee, Microsoft would gain 8.9 percentage points of market share.
The second model is based on the current generation of consoles: the PS5 and the Xbox Series X and S. This economic model must therefore primarily predict the future. According to Lee, Microsoft would gain 5.5 percentage points of market share in the future if the company excluded the Call of Duty series from the PlayStation 5. The economist arrived at this percentage by calculating how many PS5 owners would buy an Xbox Series X or S. Call of Duty becomes an Xbox exclusive.
The latest model is supposed to predict when it will be profitable for Microsoft to exclude Call of Duty from the PlayStation. Lee acknowledged that the FTC’s models only assume total Call of Duty exclusivity and did not take into account the game’s future availability on the Nintendo Switch. He again referred to the argument that, according to the FTC, Nintendo operates in a different market segment.
The FTC economist also argued that Microsoft can limit competition in cloud gaming and subscription services, for example by excluding Activision games from PlayStation Plus or the PlayStation cloud gaming service. According to the FTC, the acquisition makes it more likely that Activision will exclude its games from other services. If the acquisition didn’t go through, Activision would soon make its titles available on other services, says Lee. The FTC has not presented economic models for the market impact of subscription services or cloud gaming services. According to Lee, these markets are too new to make concrete judgments about them.
Head of Nvidia GeForce NOW and economics expert at Microsoft itself
Robin Lee was followed by Phil Eisler. He is the head of the Nvidia GeForce NOW cloud gaming service. Eisler appeared Tuesday as Jim Ryan in a prerecorded video interrogation. Microsoft previously excluded its Nvidia GeForce NOW games. Activision games are also not available on that service. Microsoft struck a deal earlier this year to make its titles available again on that cloud gaming platform. The tech giant has promised to do the same with Activision’s games if the acquisition goes through.
Nvidia previously opposed Microsoft’s acquisition of Activision, but now has a different view. Eisler says Nvidia is happy with its new deal with the tech giant and says it has allayed Nvidia’s concerns.
Finally, Dr. Elizabeth Bailey called as a witness. She is an economics expert who was called upon by Microsoft to give her opinion on Microsoft’s mega deal. According to IGN, Bailey stated, among other things, that Call of Duty is not essential. “Call of Duty is not essential, critical or mandatory. It is not unicorn.Bailey also considers the FTC models to be too limited, as they focus primarily on the North American market.
Bailey stated that Microsoft is primarily focused on mobile games for Activision’s content, writes The Verge. According to her mobile games accounting for 70 percent of the total gaming market. Xbox and Activision are small in this sector, says the economist. The two companies would jointly control 3.8% of the smartphone gaming market if the acquisition goes through.
about the process
Tuesday was the third day of the federal lawsuit between Microsoft and the FTC. The former wants to acquire game maker Activision Blizzard for $68.7 billion. The FTC wants to block this acquisition because it could distort competition.
The current case revolves around an FTC request for a preliminary insertion to set up. The FTC has a pending internal lawsuit; the regulator will hold the first hearings in this case on 2 August. In the meantime, however, Microsoft should already be able to complete its acquisition. Microsoft and Activision could be forced to separate again later if the FTC concludes this is necessary.
The FTC wants to stop Microsoft from completing its acquisition while its own investigation is still ongoing. The requested injunction would prohibit the tech giant from doing so. The officially ongoing process therefore has no bearing on the business itself. In the past, however, the losing party usually dropped the case. Therefore, this process is likely to determine whether or not the acquisition can proceed. However, this is not right; both Microsoft and the FTC have multiple appeal options. Tweakers recently published a backstory on this. Hearings in the federal lawsuit run through Thursday, June 29. A conclusion follows later.