Microsoft and Activision Chiefs Testify Merger Will Benefit Consumers
Satya Nadella, the chief executive of Microsoft, appeared in federal court on Wednesday to pledge his support for open platforms and consumer choice, underscoring the tech giant’s commitment to closing its $70 billion acquisition of Activision Blizzard over regulators’ objections.
“If it was up to me, I would love to get rid of the entire ‘exclusives on consoles,’” Mr. Nadella testified, rebutting claims from tech regulators that Microsoft’s deal for the video game giant would curtail competition and restrict Activision’s games only to players on Microsoft’s Xbox console. “I have no love for that world.”
The fourth day of a hearing in U.S. District Court in San Francisco that could determine the deal’s outcome was the highest-profile session, with appearances by Mr. Nadella and Activision’s chief executive, Bobby Kotick.
The Federal Trade Commission’s challenge of the blockbuster acquisition, led by its chair, Lina Khan, is viewed as a test of whether more aggressive efforts to curb tech giants can be successful. The F.T.C. is seeking a preliminary injunction that would prohibit the companies from closing the deal before the agency has the chance to argue its case in its internal court.
Microsoft has said such a lengthy delay would most likely doom the deal, a perspective that Mr. Kotick shared in his testimony on Wednesday.
The F.TC. has argued that the merger would harm competition in the video game industry and hurt consumers, because Microsoft could pull Activision’s games, like Call of Duty, from its rival Sony’s PlayStation console. Mr. Kotick promised that he had no intention of doing so, though the decision will not ultimately be his if his company is acquired.
“You would have a revolt if you were to remove the game from one platform,” Mr. Kotick said. “It would cause reputational damage to the company.” Mr. Nadella likewise said he would not withhold Call of Duty.
Under Ms. Khan, the F.T.C. has sued Meta, Microsoft and Amazon, arguing that Big Tech’s immense power over communications, social media and online commerce allows the companies to build monopolies and harm consumers.
After Microsoft announced early last year that it intended to reshape its Xbox business by buying Activision, the company struck agreements with other video game companies, like Nintendo, to show regulators that the deal would benefit gamers and not curtail access to Activision’s games.
Most government agencies, including the European Commission, were convinced. But the F.T.C. and the Competition and Markets Authority in Britain are trying to block the deal.
Court arguments have focused on the practice of exclusivity — releasing a highly anticipated game only on one console. Microsoft has repeatedly promised it will not make Call of Duty exclusive to Xbox if it acquires Activision, and offered Sony a contract putting that guarantee in writing.
But the F.T.C. argued in court last week that Microsoft had moved swiftly to buy ZeniMax Media and its slate of gaming studios for $7.5 billion in 2020 when it realized that Sony might pay to make one of ZeniMax’s important upcoming games, Starfield, exclusive to PlayStation. New ZeniMax titles, including Starfield, are now exclusive to the Xbox.
Jim Ryan, the chief executive of Sony, testified in a recorded video deposition that he thought that even if Call of Duty remained on PlayStation, Microsoft would try to “drive PlayStation gamers to the Xbox platforms” by somehow degrading the Call of Duty experience on PlayStation.
“I believe that they’re going to use Call of Duty somehow to damage us,” Mr. Ryan said.
But Mr. Nadella testified that he opposed a walled-off approach to gaming.
“I grew up in a company that always believed that software should run on as many platforms as possible,” he said. “And I believe in that.”
Microsoft has sought to portray itself as a distant third in a three-player console market dominated by Nintendo and Sony. Phil Spencer, the head of Xbox, said that as a third-place competitor, Xbox was “not a robust business.”
Mr. Spencer did acknowledge that Microsoft has had discussions about potentially excluding Activision games other than Call of Duty from PlayStation.
The F.T.C. has argued that Microsoft’s acquisition of Activision would also give it an unfair advantage in gaming subscription services and the nascent market for cloud gaming.
Judge Jacqueline Scott Corley is expected to decide whether to grant the injunction before July 18, the date the deal is expected to close. At times, her courtroom questions have been skeptical of some of the F.T.C.’s arguments.
The F.T.C., for example, tried to get Mr. Spencer to swear he would put Call of Duty on PlayStation for at least 10 years, no matter what terms Sony requested as part of that agreement. Judge Corley seemed to feel that such a blanket promise was unrealistic, especially if Sony asked for something unreasonable, like receiving Call of Duty for free.
“Well, it’s not going to be for zero dollars,” Judge Corley said, sounding impatient. “That was understood.”
David McCabe contributed reporting from Washington.
