Microsoft's FTC Win Presents Bigger Challenges for Sony Than Nintendo

What a difference a day makes. After months of legal wrangling the world over, Microsoft has scored a major win in its bid to acquire gaming megalith Activision Blizzard King to join the Xbox Game Studios stable for a whopping $69 billion.

After five days of testimony — and quite a few tittilating reveals — San Francisco Judge Jacqueline Scott Corley denied the FTC’s request for a preliminary injunction on the deal. (The FTC’s antitrust suit against Microsoft, which spawned this preliminary injunction, is still pending.)

Here are Judge Corley’s remarks on the ruling, via The Verge:

Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services. This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.

After the ruling was issued, Xbox head Phil Spencer shared a message of gratitude on social media. He concluded the thread by reiterating Microsoft’s stance that the deal will benefit players worldwide.

“We know that players around the world have been watching this case closely and I’m proud of our efforts to expand player access and choice throughout this journey,” Spencer wrote.

It appears the US ruling may has also altered the deal’s trajectory over in the UK. Shortly after Judge Corley’s decision became public, Microsoft Vice Chair and President Brad Smith shared that the company had come to an agreement with the UK’s Competition and Markets Authority (CMA) to suspend Microsoft’s appeal of the CMA’s intial ruling that the deal would be anticompetitive.

Smith’s statement suggests that Microsoft and the CMA will work behind closed doors to bring the deal to fruition, though perhaps with some UK-exclusive caveats. According to IGN, the UK agency said it's “ready to consider any proposals from Microsoft to restructure the transaction." That said, the CMA remains concerned about the deal’s impact on the cloud market: "The deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come."

While the precise outcome isn’t clear at this point, these two developments are undoubtedly good news for those hoping that the deal will go through. The wombo combo of news saw Activision’s share price spike more than 12 percent on the day, approaching 52-week highs and approaching the blockbuster deal’s $95-per-share valuation.

But how will Microsoft’s key rivals in the console space — Nintendo and Sony — respond to this news? Let’s get the easy one out of the way first.

Frankly, from what we’ve seen over the course of the past 18 months, Nintendo does not give a shit about this deal either way. Yes, the Mario-maker has agreed to a tenative 10-year deal with Microsoft to bring Xbox and Activision titles (including Call of Duty) to Nintendo consoles. If I were to speculate, I would imagine Nintendo’s top brass are feeling quite #blessed and unbothered atop the giant piles of money they made from The Super Mario Bros. Movie and Tears of the Kingdom this year.

Nintendo is going to keep making weird, wonderful games that let you pick a virtual nose, and rerelease classic games at $60-70 a pop. They’re going to make more animated movies, too. And we will all continue to love them in spite of it, and maybe even because of it. With more than 125 million Switch consoles sold since 2017, Nintendo is sitting pretty on the pinnacle of the console war mountain. Meanwhile, Sony and Microsoft are tussling over canned beans and matches down at base camp.

Which brings us to PlayStation. While the Microsoft-Activision deal isn’t done-done, there’s no pussyfooting around the fact that these new twists in the story are terrible, no-good, very bad news for Sony. In fact, according to Axios’s Stephen Totilo, Judge Corley’s ruling states that “The FTC’s heavy reliance on [PlayStation chief Jim] Ryan’s testimony is unpersuasive,” instead concluding that the deal was “perhaps bad for Sony. But good for Call of Duty gamers and future gamers.” Yeowch.

For the moment, at least, it seems that Sony’s bid to squelch the deal at all costs has failed. So in the months and years ahead, I hope to see PlayStation double down on where it has succeeded most in expanding in recent years — movies and TV. PlayStation Studios has plenty of adaptations in the works, like Twisted Metal, Grand Turismo, and God of War. Uncharted was fine, I guess. And The Last of Us was great, even if all the cool kids want to pretend that it sucks. Not all of these have to hit, but if we get another great season of TLOU and another dinger in the next year or two, Sony will be sitting pretty.

For a whole myriad of reasons both internal and external, Sony’s approach to this console generation has been reactive and scattershot. (Consider the inscrutable PS Plus revamp, the oddly muted launch of PSVR 2, and whatever the heck the Project Q handheld is going for.) In the near term, doubling down on IP — which has long been PlayStation’s greatest strength — would seem to be a wise strategy.

All that raises another big question — will Sony make a big deal of its own to answer Microsoft, now that the writing is seemingly on the wall? Forbes’s Paul Tassi thinks so:

I’m not so sure about this. Just because a company would like to buy something doesn’t necessarily mean it’s for sale. (We’ve seen this dance play out between Microsoft and Sega for literal decades now.) I understand why either of these deals would make sense for Sony — these companies make fantastic games that people love, and both already have solid relationships with PlayStation. Sony is already a minority shareholder in FromSoft. At the end of the day, everything has a price, but I don’t think we’d see nearly as many quirky or niche games from either studio if Sony acquired them.

Did you enjoy Live A Live or Octopath Traveler on Nintendo Switch? Then you don’t want Sony to buy Square Enix.

At this point, one thing’s certain — with the Microsoft-Activision deal deadline set to expire July 18, there’s a whole lot of shoes yet to fall. Buckle up, kiddoes.