Micrososft Corp.’s chief executive officer reaffirmed his company’s promise to keep Activision Blizzard Inc.’s top-selling Call of Duty on rival Sony Corp.’s PlayStation console as he sought to defend the biggest-ever video gaming deal from a regulatory attack.
Microsoft called its own CEO, Satya Nadella, and Activision CEO Bobby Kotick to testify in San Francisco federal court Wednesday to reinforce its argument that the companies’ $69 billion tie-up won’t hurt competition in the markets for console and subscription-based games.
The case represents a major test for the US Federal Trade Commission’s ability to block tech deals in court after the agency lost a challenge to an acquisition by Meta Platforms Inc. earlier this year.
Nadella said he would “100%” commit to keeping the Call of Duty shooter game on Sony’s gaming platforms. Last week, Phil Spencer, who heads Microsoft Gaming, also vowed under oath not to exclude the title from PlayStation consoles.
The promises were made to US District Judge Jacqueline Scott Corley, who must decide whether to halt the Microsoft deal — which has a July 18 closure deadline — while the FTC’s legal challenge to the blockbuster transaction plays out.
While answering questions from both Microsoft’s and the FTC’s attorneys during his nearly 45 minutes on the stand, Nadella shared a light moment with the judge, who asked him if he plays Activision’s hugely popular Candy Crush mobile game. “I do,” he said with a hearty laugh. “And Call of Duty.”
How game device makers use exclusive titles to beat competition has been a recurring theme in the FTC’s case against Microsoft. Nadella said he personally doesn’t support content exclusivity on consoles. “If it was up to me, I would love to get rid of” exclusives on consoles, he said.
But Sony, the dominant console market player, has “defined competition using exclusives,” Nadella said. “So that’s the world we live in. I have no love for that world,” he said.
The FTC argues the deal would harm Microsoft’s rivals, including Sony — if Call of Duty is excluded from PlayStation devices.
The agency also says the deal would weaken competition in the up-and-coming cloud market, which lets gamers stream games to PCs and consoles rather than downloading them.
Microsoft’s attorney Rakesh Kilaru asked Nadella if he thinks cloud gaming could replace console gaming. The company has argued that the FTC’s cloud gaming concern is a stretch given that the technology is still being developed.
“It’s tough,” Nadella said, explaining that Microsoft’s cloud gaming efforts haven’t “worked out” as well as the company had hoped.
“Satya made it abundantly clear that Microsoft will honor its commitments to its partners and the gaming community to bring more games to more players,” Microsoft said in a statement.
Nadella’s testimony came after Kotick earlier told the judge that Activision will likely abandon Microsoft’s takeover bid if the FTC wins a ruling pausing the deal.
“My board’s view is if the preliminary injunction is granted, we don’t see how this deal will continue,” Kotick said.
Kotick pushed back against FTC’s console market argument. Taking Call of Duty out of PlayStation would be very “detrimental to our business,” he said, adding that gamers would “revolt” if the the top-selling title was pulled from any game platform.
He also displayed a lack of enthusiasm for putting Activision games on subscription game services, a market the FTC believes will be harmed if the deal is completed.
The case is Federal Trade Commission v. Microsoft Corp., 3:23-cv-02880, US District Court, Northern District of California (San Francisco).