Microsoft has officially admitted defeat in the longstanding console wars. This came as part of a submission to a court on the first day of its battle with the Federal Trade Commission (FTC) over its proposed $69 billion acquisition of Activision Blizzard. The software giant, whose Xbox console has consistently ranked third behind Sony’s PlayStation and Nintendo, revealed that it owns a mere 16% sales market share.
The startling disclosure was included in a document outlining Microsoft’s journey in the gaming industry since its debut with the original Xbox in 2001. The Xbox console, the document claimed, has been significantly outsold by PlayStation and Nintendo ever since its introduction to the market, placing Microsoft firmly in third place in terms of sales market share. This figure is mirrored in the console revenue and share of consoles currently in use, where Xbox also trails with 21%.
However, Microsoft is not admitting defeat entirely. Instead, it’s focusing on a different approach to profitability in the gaming market. By selling its consoles at a loss, Microsoft effectively subsidizes gamers’ hardware purchases, hoping to recoup this revenue through game and accessory sales.
This strategy plays a significant role in Microsoft’s defence against the FTC’s move to block its massive Activision Blizzard acquisition. If the FTC is successful in imposing a preliminary injunction, it would stall the deal until an evidentiary hearing slated for August 2, 2023. This would fall after the scheduled closing date of the deal, July 18, 2023, and may force both parties to renegotiate the merger terms.
Microsoft’s acquisition of Activision Blizzard has raised concerns in regulatory circles due to fears that Xbox could dominate the games market by making popular games such as Call of Duty Xbox-exclusive. Microsoft has vehemently denied such intentions.
Nonetheless, Microsoft contends that its position as the third-place gaming console necessitates the Activision Blizzard merger to establish itself as a viable competitor against Sony and Nintendo. The outcome of the FTC trial could significantly impact Microsoft’s position and strategy in the gaming market.
Background
Microsoft is currently involved in a significant legal battle over its proposed acquisition of Activision Blizzard. Initiated by the FTC in December last year, the trial is expected to have a far-reaching impact on the fate of the proposed acquisition. The UK’s Competition and Markets Authority also challenges the merger, adding to the scrutiny that this deal is undergoing on a global scale.
As of the time of writing, the FTC has managed to secure a temporary restraining order that effectively blocks the Microsoft-Activision Blizzard deal for now. If the FTC is successful in imposing a preliminary injunction, it could be a significant roadblock for the proposed acquisition. The trial’s proceedings could shape the future of the gaming market, setting a precedent for similar cases in the future. It’s safe to say that the world is watching this case with bated breath.
