The console war is not meant to be won

Microsoft and Sony's business models go head to head in court

Welcome back to Multicore for Friday, June 30th.

Sorry again for the lack of output this week. Today is the first day I feel close to my usual computer-operating self. I will just say, in my defence, that Steph Curry missed almost a full month last NBA season with a much less serious shoulder dislocation than mine. Shooting 43% from 3 or writing Multicore, which is more difficult? Who can say.

Anyway, I expect to be back to my regular schedule from now on. Thank you for your patience.

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As I noted the first and last time I wrote about Microsoft's possibly already derailed bid to buy Activision Blizzard, it's not something I planned to cover a lot. The past week's court hearing between Microsoft and the US Federal Trade Commission, however, has turned up such dramatic console war shithousery that I'm afraid we're going to have to return to the subject. It's the most intensely public depiction of what it takes to compete as a hardware platform vendor since the Apple v. Samsung patent infringement trial a decade ago.

Earlier this month, the FTC argued for a preliminary injunction to block Microsoft's Activision acquisition. The deal has already been barred by UK regulators, though the EU and Japan have cleared it, and Microsoft will begin its UK appeal next month.

This FTC hearing ended yesterday, with a decision expected soon, so I'm not going to make any predictions. It would also be impossible to summarise the whole thing. Instead, just bask in this collection of revelations that emerged through testimony and discovery. The outlines of much of it were known or assumed, but it lays bare Microsoft’s frantic, unorthodox Xbox strategy like never before.

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On November 10th, 2020, Xbox chief Phil Spencer emailed Microsoft execs including CEO Satya Nadella and CFO Amy Hood requesting permission to approach Sega about acquiring its gaming business. Spencer believed the deal would help "accelerate Xbox Game Pass both on and off-console", particularly in Asia. It also emerged that a year earlier, Microsoft circulated an internal strategy document outlining a largely similar case for acquiring Square Enix.

Just three days before Spencer sent that email about Sega, Bloomberg reported that several Japanese developers "from small to big" had been approached by Microsoft about potential acquisitions. Days later, Spencer flat-out denied the report in an interview with GameSpot, saying "I don't think so. I mean, I'm not in every meeting that every team has, but I'll say not from me."

Foreign acquisitions of major Japanese companies are rare and complex, but both Sega and Square Enix have long been floated as natural fits for Microsoft in the vein of its deal for Bethesda parent ZeniMax. Square’s Final Fantasy XVI — which I am presently in love with, by the way — is the kind of marquee blockbuster that could drive Game Pass revenue even if it were released on the PS5 as well. Microsoft also struck deals a while back to bring several Final Fantasy games and Sega's Yakuza/Like a Dragon series to Game Pass.

I'm not at all surprised that Microsoft explored the possibility of acquiring both companies, then. But it's one thing to say that, and quite another to see it written down like this. When GameSpot asked Spencer whether Microsoft was attempting to acquire Japanese developers, he replied "I think that's not accurate" the day after he sought approval at the highest level to do precisely that.

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Speaking of saying things in private that you might not want to get read out in court, here's Sony's PlayStation chief Jim Ryan two days after Microsoft announced its proposed Activision Blizzard acquisition in January 2022: