Microsoft recently made statements in a legal filing indicating that it believes “Xbox has lost the console wars” and that Sony and Nintendo are poised to continue dominating the gaming market for years to come.
These remarks were presented as part of Microsoft’s defense in an ongoing trial with regulators in the United States, following the FTC’s lawsuit to block Microsoft’s planned acquisition of Activision Blizzard in December.
The proposed $69 billion buyout of Activision Blizzard by Microsoft would be the largest acquisition in gaming industry history, surpassing Take-Two’s purchase of Zynga by $57 billion.
However, Sony and regulators have consistently voiced concerns about the potential concentration of power in the gaming industry if the acquisition were to proceed. In response, Microsoft has argued that the move would actually level the playing field rather than consolidate power.
Microsoft’s legal filing reveals that Xbox currently holds only 16% of console sales and a slightly higher share of the global console install base as of 2021. The company admits that it has been the least successful console manufacturer in terms of sales for the majority of the past 22 years.
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Microsoft even acknowledges that Sony’s gamer base in the US is currently larger than its own, although the exact difference has been redacted from the court documents.
The filing goes on to state that Microsoft believes aggressive acquisition strategies, such as the proposed Activision Blizzard deal, are necessary for Xbox to effectively compete with its Japanese rivals.
It specifically points to Sony and Nintendo’s ability to leverage exclusive content as a key factor in their ongoing dominance of the global gaming market. Microsoft previously made a similar argument to UK regulators in late 2022, conceding that PlayStation has better exclusives than Xbox.
While the outcome of the ongoing trial with the FTC remains uncertain, it is worth noting that the agency does not have the authority to outright block the Activision Blizzard acquisition. The UK’s rejection of the proposed deal, which Microsoft is currently appealing, poses a more substantial obstacle to the acquisition.
In summary, Microsoft’s legal argument in the ongoing trial suggests a recognition of the current state of the console market and the challenges Xbox faces in competing with Sony and Nintendo.
The company acknowledges its lower market share and emphasizes the importance of strategic acquisitions to level the playing field. Whether these arguments will be successful in the trial and ultimately impact the Activision Blizzard acquisition remains to be seen.
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