Before we get to today’s topic—the political savvy of Microsoft executives—a quick postscript about yesterday’s Data Sheet on the Journalism Competition and Preservation Act.
Multiple reports emerged Tuesday morning that the JCPA, federal legislation designed to force Meta and Google into sharing ad revenue with publishers, would get attached to a must-pass defense spending bill this week. But when the bill became public Tuesday evening, the JCPA was not folded in.
Barring an unlikely last-minute change, this development essentially dooms the JCPA for now. There’s no clear path to passage in Congress’s lame duck session this month, and House Republicans are highly unlikely to bring it back once they retake control of the lower chamber in 2023.
So RIP to the JCPA. Pour one out for the news industry, and score one for Meta and Google. Now, on to the rest of Data Sheet.
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Few tech giants move as shrewdly through the halls of political power as Microsoft.
Over the past few years, Microsoft executives have avoided the privacy, data-harvesting, and antitrust controversies enveloping the likes of Alphabet and Meta. They have curried favor with progressives by tolerating unionization within corporate ranks, in sharp contrast to Amazon. And they have rubbed shoulders with the necessary policymakers, accumulating well-earned political capital in the process.
“Two decades after fighting its own antitrust battles in Washington, Microsoft has emerged as a sophisticated and experienced Washington operator, positioning itself as a willing participant in regulation and developing relationships that engender rare trust,” the Washington Post declared earlier this year.
Now, Microsoft’s latest gambit only adds to its reputation.
Xbox chief Phil Spencer announced late Tuesday that Microsoft has reached an agreement with Nintendo to carry Call of Duty on the Japanese video game company’s Switch consoles for at least 10 years—provided that global regulators approve Microsoft’s planned $68.7 billion acquisition of Call of Duty developer Activision Blizzard. Spencer simultaneously confirmed Microsoft would continue to offer the franchise on PC gaming distribution platform Steam.
The landmark Nintendo deal, the terms of which were not disclosed, arrives at an all-too-perfect time for Microsoft in its quest to gain regulatory approval of the Activision Blizzard purchase.
The pact helps to undercut mounting complaints about the acquisition voiced by PlayStation parent Sony, which argues that Microsoft would be able to withhold titles like Call of Duty from rival platforms.
With the Nintendo tie-up, Microsoft is showing its similar offer to Sony—a 10-year commitment to keep Call of Duty available on PlayStation—isn’t just empty talk. In a Wall Street Journal op-ed published Monday, Microsoft president Brad Smith said cutting out Sony would be “economically irrational” given PlayStation’s position as a revenue driver for developers. Call of Duty generated more than $3 billion in net revenue in 2020, or roughly one-third of Activision Blizzard’s total sales, with a sizable chunk derived from PlayStation sales.
(Microsoft hasn’t disclosed terms of its offer, and Sony might have more to gain from trying to kill the acquisition than making nice with Xbox.)
More pressingly, the Nintendo deal gives Microsoft lawyers and executives more ammunition headed into discussions with the Federal Trade Commission, which is debating whether to try to block the acquisition on competition-related grounds. Microsoft officials are expected to make their closing arguments for the merger Wednesday in a meeting with FTC chair Lina Khan and some of the commission’s members, who will ultimately decide whether to contest the acquisition, the New York Post and Bloomberg reported.
While Khan swept into her regulatory role as a strong antitrust enforcer, pledging to rein in massive tech mergers, it’s far from certain that her agency will throw up a roadblock.
Politico reported in November that the FTC is likely to file an antitrust lawsuit aimed at blocking the acquisition, but the Post reported Sunday that FTC commissioners are split on the matter. If that’s the case, Washington insiders predicted Khan would seek concessions from Microsoft via a negotiated settlement, rather than spending political capital on fighting the acquisition.
Microsoft still faces multiple hurdles in its quest to acquire Activision Blizzard, including regulatory reviews in the U.K. and European Union. If the deal ultimately does fall through, it won’t be because company leaders played the political game poorly.
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Jacob Carpenter
NEWSWORTHY
Yet another roadblock. Apple is facing more delays and technical challenges in its quest to produce a fully autonomous vehicle, Bloomberg reported Tuesday, citing sources familiar with the matter. Company officials are now targeting 2026 for the launch of an Apple vehicle, pushing back the timeline about a year from earlier projections. Engineers are also abandoning hopes that initial vehicles will be fully autonomous, focusing instead on developing self-driving technology for highways.
The clock’s still ticking. Negotiations between the U.S. government and TikTok over national security concerns are dragging on longer than expected, putting an end-of-year target for securing a deal in jeopardy, the Wall Street Journal reported Tuesday. Sources familiar with the negotiations told the Journal that multiple issues remain unresolved between federal authorities and TikTok’s Chinese parent, ByteDance, including access to the prized algorithm underpinning the social media app. The discussions are complicated by growing calls from U.S. politicians to take a hard line against ByteDance, largely owing to fears that the Chinese government could access the company’s data and technology.
A few fewer iPhones. Morgan Stanley slashed its forecast for current-quarter iPhone shipments by another 3 million on Wednesday, the latest sign of short-term pessimism in Apple’s production capabilities, CNBC reported. Morgan Stanley analysts now expect Apple will ship about 75.5 million iPhones this quarter, with the projected decline largely attributable to labor issues at a primary assembly plant in China. However, Morgan Stanley analysts added that demand for the latest iPhone line “remains solid” and customers likely will stomach abnormally long wait times for devices.
Judgment day for Sunny. A federal judge is expected to sentence former Theranos executive Ramesh “Sunny” Balwani on Wednesday following his conviction on fraud and conspiracy charges this summer, the Associated Press reported. Prosecutors are seeking a 15-year prison sentence for Balwani for his role in the $9 billion collapse of the blood-testing company, while Balwani’s lawyers are asking for less than a year of confinement. Balwani’s former business and romantic partner, Elizabeth Holmes, received an 11-year prison sentence last month after jurors found her guilty of four fraud charges.
FOOD FOR THOUGHT
Such a downer. President Joe Biden, Apple CEO Tim Cook, and some of the semiconductor industry’s head honchos gathered Tuesday to celebrate Taiwan Semiconductor Manufacturing Co.’s pledged $40 billion investment in Arizona—only for Bloomberg columnist Tim Culpan to rain on their party. Culpan argued Wednesday that TSMC’s much-heralded commitment to manufacturing in the U.S. isn’t as impressive as it seems, declaring that it “won’t be a game changer.” Culpan observed that the world’s largest chipmaker will only produce a tiny fraction of its wafers in Arizona, leaving tech companies largely dependent on foreign-made semiconductors. He also noted that TSMC’s research, development, planning, and operations will remain headquartered in Taiwan—an arrangement that puts Western supply chains at risk should China invade Taiwan.
From the article:
This week TSMC is lauding the fact that 3nm will hit Arizona in 2026, whereas that same technology is scheduled to be unveiled in Taiwan next year. In other words, the U.S. will still be behind by two to three years, or one to two generations of chip technology.
No less important is capacity. TSMC’s Arizona fabs will produce 600,000 wafers annually. That sounds impressive, but it’s really not. The Taiwanese company topped 14.2 million last year and is on track to churn out 15.4 million 12-inch wafers loaded with chips this year.
IN CASE YOU MISSED IT
Meta bans staff from discussing ‘very disruptive’ topics including abortion, gun rights, and vaccines in new ‘community engagement expectations,’ by Kylie Robison
‘Why do we allow this stuff?’ Jamie Dimon says investing in crypto tokens is like buying ‘pet rocks,’ by Chloe Taylor
A bankruptcy court is allowing the busted crypto lender Celsius to hand out $2.8 million in bonuses to keep employees from quitting, by Alena Botros
Will the metaverse be an inclusive workspace? by Lila MacLellan
Elon Musk’s tweet confirms he’s added staff beds at Twitter HQ—but insists he’s just helping ‘tired employees,’ by Christiaan Hetzner
San Francisco says, actually, never mind that plan to have killer robots patrol the streets, by the Associated Press
BEFORE YOU GO
She’ll shake it off. Who knew SBF was such a Swiftie? The Financial Times reported Wednesday that FTX and global pop star Taylor Swift nearly reached a $100 million sponsorship deal in the months before the cryptocurrency exchange went bankrupt. Sources familiar with the negotiations said former FTX CEO and current international antihero Sam Bankman-Fried was a prime proponent of the deal, despite objections from some company officials. The arrangement would have involved sponsorship of Swift’s tour and the issuance of tickets in the form of non-fungible tokens, among other tie-ins. It’s unclear whether an agreement fell through because Swift knew Bankman-Fried was trouble.
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