Microsoft was ready to “go spend Sony out of business” to strengthen Xbox

Microsoft’s Xbox Game Studios chief, Matt Booty, was encouraging Xbox CFO Tim Stuart to spend big money on acquiring game content in 2019 to set the company up to battle Sony in subscriptions. The revelation comes in an email thread that’s part of the FTC v. Microsoft hearing.

“We (Microsoft) are in a very unique position to be able to go spend Sony out of business,” said Booty in a December 2019 email, referencing spending $2 billion or $3 billion in 2020 to avoid competitors getting ahead in content at a later date.

“It is practically impossible for anyone to start a new video streaming service at scale at this point,” said Booty, referencing competitors like Google, Amazon, and Sony. Booty described content as a moat and that only Sony could really compete with Xbox Game Pass:

In games, Google is 3 to 4 years away from being able to have a studio up and running. Amazon has shown no ability to execute on game content. Content is the one moat that we have, in terms of a catalog that runs on current devices and capability to create new. Sony is really the only other player who could compete with Game Pass and we have a 2 year and 10 million subs lead.

Microsoft argues the email is old and that it never pursued such a strategy anyway. “This email is three and a half years old and predates the announcement of our acquisition by 25 months,” says David Cuddy, general manager of public affairs at Microsoft, in a statement to The Verge. “It refers to industry trends we never pursued and is unrelated to the acquisition.” The internal exchange was also sealed as part of a separate so-called “gamers lawsuit” recently.

The email is part of a thread discussing Xbox Game Pass, with the rest of the chain redacted. But it looks like Microsoft was considering reversing the idea of day and date releases of its own games on Xbox Game Pass in 2019 — something Booty wasn’t happy about. “If we reverse course on day and date, it’s going to be hard to convince folks that things like Mixer or xCloud have much of a chance of surviving scrutiny either,” he said.

The email shows Microsoft’s strategy and thinking around game content for its Xbox Game Pass subscription in 2019. Microsoft has since acquired Bethesda for $7.5 billion and is trying to get its $68.7 billion proposed Activision Blizzard deal over the line. Both are a lot bigger than the $2-3 billion figure Booty floated in 2019.

Microsoft also seriously considered acquiring Sega and Bungie, with Xbox chief Phil Spencer even going as far as requesting strategy approval from Microsoft CEO Satya Nadella to approach Sega Sammy regarding a potential acquisition of its Sega gaming studios. Both the Sega and Bungie targets were part of a larger watchlist that Microsoft had put together to acquire key studios and mobile developers to bolster Xbox Game Pass.

Update, June 26th 18:15PM ET: Article updated with comment from Microsoft.