Microsoft CEO Satya Nadella arrives in a San Francisco courtroom on June 28, 2023. The chief executives of Microsoft and Activision Blizzard are expected to testify in a bid to convince a California federal judge to throw out the Federal Trade Commission’s efforts to block their $69 billion deal.
Shelby Knowles | Bloomberg | Getty Images
Microsoft Chief Executive Satya Nadella said on Wednesday he wants to eliminate exclusivity arrangements between video games and popular consoles.
Larger gaming rivals Nintendo and Sony often release exclusive games on their devices as a way to attract customers in a crowded market. Microsoft has adopted this strategy with its Xbox, though Nadella said his company is a “low share player in the console market.”
Regarding exclusive deals, Nadella said “I have no love for that world.”
Nadella speaks at a hearing in San Francisco federal court as the FTC seeks judicial support to block Microsoft’s $68.7 billion acquisition of the video game publisher Activision Blizzard. The FTC is concerned that the tie-up could allow Microsoft to withhold popular titles from Activision’s library from other consoles or downgrade service for those titles elsewhere.
Microsoft says it wants to add Activision games to its Game Pass subscription service. To assuage regulators’ concerns, Microsoft offered a 10-year deal to make Activision Blizzard’s hit Call of Duty game run on Sony and Nintendo consoles.
Sony has yet to accept Microsoft’s offer and opposes its acquisition of Activision Blizzard.
“I don’t think this deal is good for competition,” Jim Ryan, the head of Sony Interactive Entertainment, said in video testimony played in court Tuesday.
Nadella’s views on consoles mirror his broader views on technology platforms. Since becoming CEO in 2014, he has transformed the culture of a company long known for its proprietary closed systems, trying to ensure its software works well on a wide variety of devices, not just its own hardware.
Microsoft brings its Office productivity apps to apple iPad and its SQL Server database software on Linux. In earlier years, Microsoft prioritized Windows, but the operating system is no longer the significant revenue generator it once was. The Windows business accounted for just over 10% of revenue in the fiscal third quarter, down from about 25% in 2011, Microsoft said.
A Microsoft spokesperson said Nadella’s comments Wednesday “make it very clear that Microsoft will deliver on its commitment to its partners and the gaming community to bring more games to more players.”
Nadella also acknowledged that Microsoft faces challenges when it comes to gaming. He said Microsoft’s cloud service, which is available with a Game Pass Ultimate subscription, “isn’t good enough” as an alternative to the current platform.
Activision CEO Bobby Kotick is skeptical of multi-game subscription services in general.He told court on Wednesday that his company had experimented with them, including with Nvidia’s GeForce Now is in beta.
Kotick, whose company is based in Santa Monica, Calif., said he still wants to close the deal with Microsoft even if he disagrees with subscriptions and whether they represent a huge opportunity.
“Maybe part of that is in Los Angeles, seeing the big media companies move their content to these subscription streaming services and the business results suffer,” Kotick said.
Judge Jacqueline Scott Corley will decide whether the FTC will receive a preliminary injunction preventing Microsoft from completing the deal. Meanwhile, in the UK, the Competition and Markets Authority moved to block the deal in April.
“My board’s view is that they don’t know how the deal will proceed if the preliminary injunction is approved,” Kotick said.
watch: TD Cowen’s Aaron Glick says FTC’s injunction on Microsoft-Activision merger is ‘positive development’
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