Microsoft has been trying to convince Sony that it will keep Call of Duty on PlayStation if its giant Activision acquisition is approved, but the companies haven’t come to an agreement over the terms of any potential deal. That’s clearly left Microsoft frustrated and looking for partners to counter concerns from regulators. Both Nvidia and Nintendo have stepped up to help Microsoft try to ease regulator concerns.
Speaking during a special press event in Brussels today, Microsoft president Brad Smith outlined the software giant’s position on the deal and described Sony as a “super dominant company” that is outselling Xbox consoles and opposes competition in the form of the Activision acquisition.
Smith directed one question to the UK’s Competition and Markets Authority (CMA), which has raised concerns over game exclusivity and cloud gaming. “Do you want to kill a deal and cement Sony’s position and its 80 percent share in the European Economic Area... or do you want to let the future go forward with behavioral guardrails and remedies and bring this title to 150 million more people?” asked Smith. “I think that’s the fundamental choice that most regulators are going to need to address.”
“Do you want to kill a deal and cement Sony’s position and its 80 percent share”
Smith and other Microsoft executives have been meeting with European lawmakers today in a showdown over Activision and Call of Duty. Xbox chief Phil Spencer and other senior Microsoft executives have been arguing Microsoft’s case today, with PlayStation chief Jim Ryan, Activision CEO Bobby Kotick, and representatives from Google, Nvidia, Valve, Electronic Arts, and the European Games Developer Federation all present at meetings today. Half a dozen different national competition watchdogs were also at the meetings.
In between meetings and calls to allow the acquisition to take place, Microsoft took the time to announce it has struck a new deal with Nvidia, which operates the GeForce Now cloud gaming service. It hopes the deal will ease some concerns about the future of cloud gaming and Microsoft’s control of Xbox games and potentially Activision Blizzard titles on rival services. This is also why Microsoft and Nintendo signed a deal today to bring Call of Duty to Nintendo products on the same day games from the franchise come to Xbox.
However, Smith didn’t share anything from the closed-door meetings, instead trying to paint a picture of a dominant Sony that has been complaining about Call of Duty access.
“Even last year, when Sony suffered constraints in its supply chain and it saw its numbers dip, they came back strong,” said Smith. “In the fourth quarter as their supply chain recovered, by our calculation on a global basis, Sony outsold Microsoft in the fourth quarter by a margin of 69 to 31. Pretty much consistent with the global market shares we’ve seen for 20 years.”
Microsoft revealed that “Sony has emerged as the loudest objector” to the Activision acquisition last year after a public back-and-forth between Xbox’s Spencer and PlayStation’s Ryan. Microsoft initially offered Sony a deal to keep Call of Duty on PlayStation for “several more years” beyond an existing marketing deal, with Spencer confirming the offer in a statement to The Verge.
Ryan described the deal as “inadequate on many levels” and noted that Sony was planning on keeping details of its negotiations private. “I hadn’t intended to comment on what I understood to be a private business discussion, but I feel the need to set the record straight because Phil Spencer brought this into the public forum,” said Ryan in a statement in September last year.
“Microsoft’s demand for performance reviews for SIE’s leadership is obvious harassment.”
The sharp words haven’t stopped there. Microsoft has also accused Sony of paying developers to keep their content off of its Xbox Game Pass service, while Sony has argued that Microsoft’s Activision Blizzard acquisition could “hurt developers and lead to price rises.” During filings for an FTC suit against the acquisition, Sony lawyers labeled Microsoft’s demands to see Sony employee performance reviews as “obvious harassment.”
“Microsoft’s demand for performance reviews for SIE’s leadership is obvious harassment,” says the legal filing. “Even in employment cases courts require a specific showing of relevance before requiring production of personnel files.”
But while Sony and Microsoft can trade arguments all day, it’s ultimately up to regulators to allow the deal to go through. Whether Microsoft’s Nintendo and Nvidia deals are enough to convince regulators remains to be seen, but Microsoft is certainly hoping to avoid heading to court to defend its deal both in Europe and the US.
EU regulators have set an April 11th deadline for a final decision on Microsoft’s proposed acquisition of Activision. We’re now waiting to see how regulators in the US, UK, and EU respond to Microsoft’s new deals today.