The Microsoft-Activision deal is almost upon us.
Though the FTC presented several games, like Starfield and Redfall, to prove its antitrust case, one key game that was curiously missing from notable testimony: Halo. Microsoft’s first-party exclusive may be made in-house — which could’ve potentially kept it from being named extensively in the evidence — but the title actually began its history at Bungie, before Microsoft purchased the company.
Couldn’t Master Chief Save the FTC?
Very bizarrely, there’s a portion of the judge’s opinion where she says that Zenimax titles Starfield and Redfall being exclusive to the Xbox platform shouldn’t be compared to Call of Duty, as these games are fairly different. She writes about how Starfield and Redfall have different release dates than Call of Duty and are of different genres.
That’s a confusing distinction to draw, but let’s run with it for a time, shall we? What if the FTC were to rush out with a better video game example that’s more apples-to-apples with Call of Duty and is indeed exclusive to Xbox? What if we talked more about Halo?
Famously almost a Mac exclusive, Halo is a shooter video game that spans books, films, and merchandise. It’s Xbox’s crown jewel. It’s the perfect example to draw because Halo was invented by Bungie, and first announced in 1999. Microsoft acquired Bungie in 2000 and Halo became a launch title for the Xbox. Halo is Xbox’s God of War, or Last of Us, or Horizon Zero Dawn. Except there’s only one of Halo, which is exactly why we're here, because Microsoft didn’t make Call of Duty.
While the FTC briefly mentions Halo in some of its findings, it did not get a chance to elaborate on its points, as the deal has been rushed. The judge said that she would not respond to every point from the FTC “given the compressed time the court had to issue a written opinion in light of the impending termination date.” But this pending deadline feels contrived. When Microsoft and Activision Blizzard first announced their deal in January of 2022, they had already set an estimated completion date of June 2023. As Matt Stoller, director of research at the American Economic Liberties Project, an anti-monopoly advocacy group, and a former policy adviser to the U.S. Senate Committee on the Budget, notes, it’s curious that the San Francisco judge would work to meet Microsoft’s own deadline to ensure the deal doesn’t fall apart. After all, even if the deadline passes, the two companies can still renegotiate a deal. Analysts expect Activision Blizzard would likely use $3 billion to buy back company stock. July 18 isn’t a federal court deadline; it’s what the shareholders want.
Yet the court kept to a strict, speedy timeline, which Microsoft has said in statements it appreciated and was looking forward to. This has led to several parts of the FTC’s argument being left by the wayside, and it’s also led to a more truncated version of an FTC versus Microsoft trial, and why Halo was possibly overlooked.
As the FTC wrote in its appeal last week, it was odd when the judge said that “there are no internal documents, emails, or chats contradicting Microsoft’s stated intent not to make Call of Duty exclusive to Xbox consoles.”The FTC said there was indeed evidence, and pointed to Microsoft Gaming CFO saying that Microsoft would not be pulling Zenimax content off of any rival after the acquisition but Microsoft “want[s] that content in the long run to be either first or better or best or pick your differentiated experience on our platform.”
This becomes a strange battle of semantics, where the judge can argue that this statement technically was about Zenimax and not about Call of Duty, but where the FTC is asking us to extrapolate the facts. The FTC is saying: If Microsoft can do this with Zenimax, why don’t we assume they’ll do the same with Call of Duty? After all, they did it once already with Halo, which at one point was one of the most popular games on Earth.
If the judge’s words around how Starfield and Redfall aren’t the right kinds of games to be compared are to be followed, then, Halo would make more sense to look at when considering what Microsoft’s end-game with Activision Blizzard is. Phil Spencer alludes to this brand association in a 2019 email entered into evidence. The gamers come to Xbox for Halo. You know what they also want? Call of Duty.
Both games have a rich development history that span decades and they have loyal fanbases that are hungry for more content. In my several years of talking to gamers about their playing preferences, I got varied answers for what people like to play. Fast-twitch shooters are a favorite of many, and people often move in between titles. Couldn’t Halo have been the silver bullet in the FTC’s case against Microsoft given its better parallels with Call of Duty?
Ultimately, it is unlikely that one game would have swayed the judge’s decision. To bring up another world-dominating game, the trial spent some time discussing Minecraft, the second-best selling game in the world behind only Tetris. The judge accepted Minecraft as an example of how Microsoft might allow a game across multiple platforms, and didn’t find issue with how it has a different genre and release date than Call of Duty.
An Uphill Battle
The omission of Halo from the world’s largest gaming antitrust case is emblematic of a larger trend in our government. The FTC’s workload has expanded in recent decades as it sees hundreds of mergers a month, while hiring has not kept up with this rapid expansion of big business. It’s understaffed and underfunded. The FTC is aggressively bringing in cases but analysts speak their predictions like foregone conclusions. The FTC wasn’t expected to win, even if the issues it raises contain any merit. For now, the courts are solidly on the side of big business.
The merger comes after sexual harassment lawsuits and investigations, and it comes to bury those headlines and make them the history of two years ago. People forget what happened really quickly. In 1998, Microsoft faced the U.S. government over monopolistic claims. The competitor who had grievances back then was Netescape, and that’s a name some may not remember at all, depending on how old you are. Microsoft lost badly, and nearly got broken up into two companies. But it appealed and the judge was found to have behaved unethically by giving reporters interviews. He responded that he had had no opinion of Microsoft before he started presiding over the antitrust case, and that he had formed his negative opinion after the executives had testified in front of him for hours, telling lies.
Contrast that with what the FTC wrote in its appeal last week: the court relied on the “self-serving testimony of Microsoft executives that they do not intend to foreclose rivals” as evidence. The year is now 2023, and a very different judge, judge Jacqueline Scott Corley wrote in a 53-paged opinion that she believes in Microsoft. She believes Microsoft’s promises to keep Call of Duty on PlayStation for ten years on parity with Xbox. Anything that comes after those ten years, well, who’s to say? And the deals guarantee COD won’t be exclusive to Xbox, but say nothing about what will happen to other Activision Blizzard heavyweights, such as Diablo and World of Warcraft.
Judge Corley is hopeful about Call of Duty landing on Nintendo Switch, and she’s hopeful about cloud gaming. It will be “perhaps bad for Sony,” she allows. “But good for Call of Duty gamers and future gamers.”