Introducing Minecraft on the Switch: A Case Study With PlayStation and Xbox Managing Partners, And What Happens When Microsoft Gets It Wrong
The court has a Zoom license which allows them to host up to 1,000 people. The reason for people to stream the hearing is to provide better access to people who want to listen in. But it’s 2023, and courts clearly aren’t prepared for the thousands of gamers that want to listen to this hearing.
With that administrative warning out of the way, we moved straight into the video deposition of PlayStation chief Jim Ryan. The program ran for around 70 minutes and at times it jumped around due to parts being edited out.
“Many of their [Xbox] games involve an element of shooting, and many of their games involve moments of online multiplayer. Both of them are more popular in the US than outside of it.
This description of Xbox games fed straight into the FTC’s argument that the Nintendo Switch is different from Xbox and PlayStation and that it’s all about the close competition in the US market between Sony and Microsoft. The FTC and Microsoft have been battling over three days of testimony about whether the Nintendo Switch is a game console and whether it competes with the PlayStation and Xbox. Ryan gave his take on the switch.
“We consider Nintendo to participate in a different market segment to Xbox and PlayStation. Nintendo’s hardware technology is of a much less sophisticated nature than PlayStation or Xbox. It sells hardware for a cheaper price and is aimed at younger people.
Ryan believes Microsoft is the platform holder and not a publisher. Microsoft does, however, publish Xbox games like Minecraft on PlayStation. Ryan admitted that something wasn’t necessary, which is likely a Call of Duty one with most publishers.
Phil Spencer, the CEO of the Xbox, testified last week that Sony wasn’t interested in shipping the kits for their consoles. it put us behind on our development for Minecraft on PS5.” Ryan says Sony did not want Microsoft to have the information for their games.
“The development kits allow developers to have visibility and to work on the feature set that our new console will deploy. [Delaying dev kits] would typically mean a developer may bring its content to the new platform later than would otherwise be the case. The knowledge of these feature sets is not something that we would rely on to enforce a contract.
I believe Microsoft intends to use Call of Duty to disadvantage the PlayStation in terms of availability and the way in which the game is made available on the console to drive people to take advantage of Game Pass on the platform.
“It was not a meaningful list. There is a selection of older games that are still on PSone but not the current version of the game.
At a meeting with investors, Ryan talked about the Microsoft Game Pass push. “That has driven them to make a large acquisition. I talked to all publishers, and they unanimously do not like Game Pass because it’s value destructive.” He said in his deposition that it is a very common view by the publishers.
It was Phil Spencer who responded to my email on May 26th which sent alarm bells ringing, so I wouldnt say I wasn’t concerned at all.
In the event that the transaction doesn’t happen, Bobby wants to cover himself by extending the marketing relationship between Sony and Activision.
One of the main reasons why we are investing in first party development and publishing is to protect against pressure on a historic business model. Your ability to be self determined increases when you own elements of a business model from top to bottom.
Microsoft lawyers want to know how Jim Ryan would run the game studio in order to avoid disrupting Sony’s business model of selling exclusive triple-A games. Ryan admits it’s not in Microsoft’s best interests to make Activision games available on all platforms:
Ryan also said he was surprised at the 25 million Xbox Game Pass subscriber numbers Microsoft disclosed in January 2022, as he was “expecting a larger number given all the money they have spent.” He compared it to Sony’s 55 million PlayStation Plus subscribers, and then Sony claimed in a filing with the Competition and Markets Authority in the UK that Microsoft has 29 million subscribers. Microsoft has not officially announced more than the 25 million figure from January 2022.
Ryan’s testimony also revealed that Xbox beat PS5 sales for three months in 2021. Sony had some shipping constraints that allowed the Xbox Series S / X sales to briefly overtake the PS5 in that period. Ryan says there’s no other time during this latest generation of consoles where Xbox sales have materially exceeded the PS5.
Over the course of 25 years, I believe that cloud technology will become a significant part of how people access games. We are making significant investments in the cloud to make it a more meaningful way for people to access game content.
Microsoft shut Call of Duty? Judge Corley’s frustration with Microsoft and the case against the xbox-psi Xbox merger
The FTC went on to call Robin Lee, PhD, a professor of economics at Harvard University. He has worked with the FTC many times in the past and has appeared as a speaker and panelist. He is very much an expert in the competition field, so Microsoft, naturally, wanted to try and tear his quantitative models apart.
Lee was interviewing to become a politician, with all the evasive answers. You can tell that Microsoft’s lawyer Beth Wilkinson was frustrated because Lee wasn’t helpful in explaining how he had defined the console market early on. A tense exchange started early on.
The rest of the exchanges didn’t get much better, and Wilkinson turned to a whiteboard in an attempt to make sense of Lee’s models. It turned into a showdown into his research, with Judge Corley intervening multiple times.
If Lee is correct about the 20 percent of players converting to xbox then the result will change a lot. If it’s just 15 percent, then “it doesn’t give Xbox a net positive for an incentive or reason” to withhold Call of Duty, argued Wilkinson.
Judge Corley was confused. It’s fair to say she was skeptical of the analysis around why Lee hadn’t separated out Call of Duty on its own since it’s so key to this hearing:
Bailey started off by claiming that “Call of Duty is not essential, critical, or a must-have” game. “It’s not a unicorn,” said Bailey, directly contradicting what Judge Corley and Lee had said earlier. Bailey argued that the merger will expand the reach of content, something that Microsoft and the European Commission argued about thanks to the Call of Duty deals.
After the FTC moved on to Call of Duty on XBOX and PC, Judge Corley asked why people wouldn’t switch to a PC where they could play the game and get more value out of it.
Source: https://www.theverge.com/2023/6/28/23776652/ftc-microsoft-day-three-hearing-summary-sony-playstation-jim-ryan-xbox-game-pass
Lee, Microsoft, and the FTC: The Game on Cloud Services of Their Choice Streaming Services, and How Bethesda Can Get It Free
The Series X and PS5 are still in that market, according to Dr. Lee. If you think about a price increase on the Series X, would the customers who buy it want to switch to the Sony PS5 or the Nintendo Switch? If this is how the market definition is created, then evaluate a price increase on any of the products in the market.
At the end of Lee’s testimony, he was questioned around cloud competition. The FTC thinks it is hard to judge harm in a market that is still seeing new competition. “The role that smaller entrants have can be greater than in other mature markets because if they can’t get access to content, then harm from foreclosure could be magnified in the future,” said Lee.
The European Commission managed to secure a remedy from Microsoft to enable a free license to consumers in EU countries that would allow them to stream via “any cloud game streaming services of their choice” all current and future Activision Blizzard PC and console games that they have a license for. Cloud providers will be able to stream games for free in EU markets. Microsoft has already claimed it will apply this automatic offer globally, but the FTC has largely dismissed Microsoft’s potential cloud agreements.
After a grueling back and forth during Lee’s testimony, it was time for something lighter. Nvidia’s Phil Eisler, who leads the GeForce Now team, appeared in a prerecorded deposition video. In a video that lasted nine minutes, the FTC called on the company to be a witness, which felt like it went by as fast as 240 frames per second.
Microsoft’s lawyer took over questioning to ask about the company’s agreement earlier this year for Xbox PC games on its streaming service. In a March 2021 email exchange with Xbox chief Phil Spencer, Xbox Game Studios head Matt Booty recommended that Bethesda’s games also be pulled from Nvidia’s GeForce Now service shortly after Microsoft’s acquisition of Bethesda.
“We’ve found over time that we get closer and closer to the quality of playing locally,” said Eisler. “Our cloud gaming servers are more powerful than consoles, so we’re able to run higher frame rates and add more visual effects.” Nvidia has upped its frame rates from 30fps all the way up to 240fps, which dramatically reduces latency.
Activision games were available on GeForce Now during its initial beta period before being pulled from the service. “We had a number of those [Activision] games on the service at beta,” says Eisler.
“The agreement entitles us to the content provided the transaction completes on the Activision side,” said Eisler. “We have already begun working with Microsoft to onboard their first-party titles, so we’re confident that will solve our concerns there.”
Source: https://www.theverge.com/2023/6/28/23776652/ftc-microsoft-day-three-hearing-summary-sony-playstation-jim-ryan-xbox-game-pass
Day Three of Microsoft’s Digital Gaming Strategy: The Case for Mobile and Xbox Console Usage of Call of Duty and the Xbox Game Pass
For the final part of day three, Microsoft called on its own economic expert: Elizabeth Bailey, PhD. Bailey is an expert on antitrust, competition policy, and intellectual property issues.
Microsoft argued that the deal was about mobile, not consoles. Bailey said that Xbox mobile revenue is less than half a percent of total mobile gaming revenue. It is small in mobile gaming. So combined, they’ll have 3.8 percent of mobile gaming.”
Bailey has been given access to the data from both consoles for Call of Duty. Microsoft argues that data for market share and usage shouldn’t be limited to just the US and that it should be global. “It reinforces that nexus of competition and competitive decisions are made not global, nor local or limited to the United States,” said Bailey.
Bailey was able to analyze game time to determine if the same games are popular in the US and other parts of the world. Bailey suggests that the most highly played games in the US are similar to games in other countries.
Source: https://www.theverge.com/2023/6/28/23776652/ftc-microsoft-day-three-hearing-summary-sony-playstation-jim-ryan-xbox-game-pass
Summary of Microsoft Incident Investigations and Comments on Electronic Communications in the U.S. Circuit Court: a case study of Call of Duty, Windows 8, and the Start button
Bailey confirmed that Lee had access to the same telemetry data, but the pair have obviously come to different conclusions. It’s worth noting that telemetry data isn’t always conclusive. Microsoft used data from the telemetry system to justify the removal of the Start button in Windows 8.
Judge Corley intervened here, asking whether people had a choice of what game was bundled and whether these bundles varied in different states across the US. Bailey said he only had an anecdote about buying a console herself and deciding between bundles. That could be a big hole in the telemetry analysis.
Bailey argued that Call of Duty was an important game and popular, but there was no evidence that it was uniquely important. There is also a chance that the Nintendo Switch will be successful without Call of Duty. Switch share has grown 35 percent without Call of Duty, Bailey claims. Bailey’s testimony will resume on day four.
Day four looks to be a big one. We’ll hear more from Bailey, but the day will kick off with Activision CEO Bobby Kotick. Microsoft CEO Satya Nadella will also appear at around 1:30PM PT, and Nvidia’s Jeff Fisher will also appear via a video briefly. Microsoft is also calling Dennis Carlton, PhD, another economics expert, to pick holes in Lee’s report.
The hearing will resume again on Wednesday morning at 8:30AM PT / 11:30AM ET. There is a long lunch break until Nadella appears since Judge Corley has a prior midday commitment.
We started off day three with a warning from Judge Jacqueline Scott Corley about people livestreaming witness testimony to YouTube and other sites. Judge Corley warned that the ability to stream US court proceedings via the public internet was at risk, and that it was strictly prohibited. Live blogged is fine, but not recording or streaming.
Oh, and if you’re really into math and quantitative analysis, then maybe you can help decipher some of the testimony from Robin Lee, PhD, the FTC’s economic advisor. It was a big part of day three that I think left everyone feeling a little dazed and confused.
Source: https://www.theverge.com/2023/6/28/23776652/ftc-microsoft-day-three-hearing-summary-sony-playstation-jim-ryan-xbox-game-pass
A Million Dollars a Year in the Life of a Games Company: The Case of Overwatch and the Last of Us, and How Much Is It Worth to PlayStation?
The fears about Microsoft acquiring a controlling interest in a gaming company began in August of 2022, after Phil Spencer, head of Microsoft’s console division, sent a list of games that Microsoft would keep on the platform. Overwatch was on that list, but Overwatch 2 was not. Ryan stated that this sent alarm bells ringing.
Sony made a mistake and accidentally revealed lots of highly confidential information about its business. As part of the FTC v. Microsoft hearing, Sony supplied a document from its CEO, Jim Ryan, that included details on the margins Sony shares with publishers and Call of Duty revenues.
The court has scrambled to remove the document, but the damage is done; reporters and Sony’s competition have already downloaded all the documents while they were in the public domain. The Last of Us Part II cost around $220 million with around 200 employees and theHorizon Forbidden West cost approximately $212 million with 300 employees.
Over 6 million people spent 70% of their time on Call of Duty, and about 1 million people spent 100% of their time on Call of Duty. In 2021, Call of Duty players spent an average of [116?] hours per year playing Call of Duty. Call of Duty players spend 70 percent of their time on the game, which means that they spent an average of 296 hours on the franchise.
And we may have an inkling of that revenue impact because Sony also accidentally revealed how much money Call of Duty is worth to PlayStation. We already knew the figure was over a billion dollars, but the document suggests CoD was worth $800 million for PlayStation revenue in just the US during 2021 — and we think the document says $1.5 billion globally. If you count accessories, subscriptions, and everything else, that adds up to a figure of more than 16 billion dollars a year. It is a huge amount.
According to SIE internal surveys, almost half of PlayStation 5 owners in the United States also own a Nintendo Switch, while less than 20% of PlayStation 5 owners in the United States also own an Xbox Series X or S.