Xbox Aimed to “Spend Sony Out of Business,” Acquisitions/Cloud Prioritized over XSX Supply

As part of their efforts to get their proposed $69 billion acquisition of Activision Blizzard approved by regulators, Microsoft has been facing off with the U.S. Federal Trade Commission in court the past couple days. The FTC wants to impose an injunction that would prevent Microsoft and Activision from closing the deal before a more crucial trial in August that would determine if the FTC has an antitrust case.

Court documents and testimony have already revealed some juicy tidbits, including that future Bethesda games may come to PlayStation, Microsoft’s admission that Xbox has lost the console wars, the uncertain status of The Elder Scrolls VI, and Phil Spencer vowing under oath that Call of Duty is staying multiplatform.

The latest bombshells largely have to do with team Xbox’s strategy heading into this current generation of gaming. While Xbox execs have tried to put a happy face on their moves, saying they simply want to bring games to as many people as possible, perhaps unsurprisingly, it seems they were much more aggressive behind the scenes. In a recently-uncovered 2019 email between Xbox Game Studios boss Matt Booty and Xbox CFO Tim Stuart, the former said they were in a unique position to “go spend Sony out of business.”

“We [Microsoft] are in a very unique position to be able to go spend Sony out of business. If we think that video game content matters in 10 years, we might look back and say, ‘Totally would have been worth it to lose $2 billion or $3 billion in 2020 to avoid a situation where Tencent, Google, Amazon, or even Sony have become the Disney of games and own most of the valuable content.’

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 player who could compete with Game Pass and we have a 2-year and 10 million subs lead.”

So yeah, we can officially disregard Microsoft’s lines that buying up endless studios was just about increasing access to games or any other high-minded goal. That said, a lot has changed in the past 3 or 4 years. Google and Amazon are no longer in the running at all, opposition to the Activision Blizzard purchase has put a kink in Microsoft’s acquisition plans, and Game Pass has not been the success the company hoped for.

Speaking of Game Pass, a newly revealed email between Phil Spencer and Tim Stuart reveals something else many suspected – that Microsoft deemphasized Xbox Series X/S production in favor of a focus on Game Pass/cloud and acquisitions.

“From a strategy perspective, I believe in our trade-offs for Cloud and Content in gaming over console volume. I world obviously love to invest in all unconstrained, but I completely support the trade-offs we’re making. […] I realize there are a ton of decisions on spend, COVID-19 impact on gaming release dates, [Xbox Game Pass] content investments etc. I believe in the trade-offs we are making for our long-term goal, but there are near- and mid-term consumer engagement and console unit volume trade-offs.”

I’m sure even more juicy details will come out of Microsoft and the FTC’s legal wrangling, and we here at Wccftech will keep you updated on the latest.