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Microsoft CEO Satya Nadella arrives in court in San Francisco on June 28, 2023. Microsoft and Activision Blizzard executives are expected to testify to convince a federal judge in California to reject the Federal Trade Commission’s efforts to block a $69 billion deal.
Shelby Knowles | bloomberg | Getty Images
Microsoft Chief Executive Officer Satya Nadella said on Wednesday that he would like to eliminate the exclusive arrangements between video games and popular game consoles.
Bigger gaming competitors Nintendo and Sony often launch exclusive titles on their consoles as a way to attract customers in a competitive market. Microsoft is also using this strategy with its Xbox, though Nadella said his company is “a player with a low share of the console market.”
Regarding exclusive deals, Nadella said, “I have no love for this world.”
Nadella spoke at a hearing in federal court in San Francisco, where the Federal Trade Commission is seeking judicial support to prevent Microsoft from finalizing its $68.7 billion acquisition of the video game publisher. Activision Blizzard. The FTC is concerned that the link could allow Microsoft to block popular games in Activision’s library from other consoles or impair service for those games elsewhere.
Microsoft said it wants to add Activision games to its Game Pass subscription service. To allay regulators’ concerns, Microsoft offered 10-year agreements to make Activision’s popular Call of Duty titles available for Sony and Nintendo consoles.
Sony did not accept Microsoft’s offer and opposes its acquisition of Activision.
“I think this deal is bad for the competition,” said Jim Ryan, president of Sony Interactive Entertainment, in a video shown in court on Tuesday.
Nadella’s view on consoles reflects his broader approach to technology platforms. Since becoming CEO in 2014, he’s changed the culture at a company long known for proprietary closed systems, trying to make sure its software can run well on multiple machines, not just on its own.
Microsoft has brought its Office productivity apps to apples iPad and its SQL Server database software to Linux. In previous years, Microsoft prioritized the Windows operating system, but today the operating system is no longer the primary source of revenue that it used to be. In its fiscal third quarter, Microsoft said Windows accounted for just over 10% of revenue, down from about 25% in 2011.
A Microsoft spokesperson said Nadella’s comments on Wednesday “made it very clear that Microsoft will live up to its commitment to its partners and the gaming community to bring more games to more gamers.”
Nadella also acknowledges that when it comes to gaming, Microsoft faces challenges. He said Microsoft’s cloud service, which is available on Game Pass Ultimate subscriptions, is “not good enough” as a replacement for existing platforms.
Activision CEO Bobby Kotick is skeptical of multigame subscription services in general. He said in court on Wednesday that his company experimented with them, including working with them nvidia GeForce Now while it is in the testing phase.
Kotick, whose company is based in Santa Monica, California, said he still wanted to close the deal with Microsoft even if he had a different opinion about subscriptions and whether they were a big opportunity.
“Part of it is probably in Los Angeles and having seen the big media companies move their content to these streaming services, and business results have taken a hit,” Kotick said.
Judge Jacqueline Scott Corley will decide whether the FTC will receive a preliminary injunction preventing Microsoft from closing the deal. Meanwhile, the UK’s Competition and Markets Authority moved to block the deal in April.
“My board’s opinion is that if the initial injunction is issued, they don’t see how the deal can proceed,” Kotick said.
He watches: FTC order on Microsoft-Activision merger ‘positive development’, says TD Cowen’s Aaron Glick
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