Microsoft's gaming strategy
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Sony on Microsoft buying Activision
From: Chris Deering
Sent: 19 January 2022 13:20
To: Jim Ryan
Subject: MS acquisition of Activision.
Phil Spencer was in CNBC saying that the acquisition would cement MS as a player in mobile games. Strikes me as more of a King play than COD. But King sold to Bobby for $5Billion and has now grown to be worth ÂŁ50 Billion. If it was a Xbox exclusivity play. Spencer could have locked up MS console exclusivity for the next 3 COD releases for maybe ÂŁ5 Billion.
The major cash out will lure most of the talent to take the money and run as fast as their contracts will allow, leaving MS with very gnarly management challenge. I bet Yves is smiling like the Cheshire cat.
If this was a play to end run PS5 etc, I think it was massively overvalued and will not meaningfully succeed. I guess MS can piss away that kind of valuation without being more harmed than helped, but I an not losing a wink of sleep over the future for our baby. Hope you agree.
Cheers.
Chris
PSÂ they would have been better off announcing a new Electric Car
On Thursday, January 20, 2022, 02:52:57 PM GMT, Jim Ryan wrote:
It's not an xbox exclusivity play at all, they're thinking bigger than that, and they have the cash to make moves like this. I've spent a fair bit of time with both Phil and Bobby over the past day, I'm pretty sure we will continue to see COD on PS for many years to come.
We have some good stuff cooking. Keep your eyes peeled.
I'm not complacent and I'd rather this hadn't happened, but we'll be ok, more than OK.
From: Chris Deering
Sent: 20 January 2022 15:01
To: Jim Ryan
Subject: Re: MS acquisition of Activision.
OK then I shouldn't worry that Sony stock dropped 12%
[This document is from FTC v. Microsoft (2023).]
Further context from The Verge: âSonyâs PlayStation chief, Jim Ryan, believed that Microsoftâs proposed acquisition of Activision Blizzard wasnât about locking games as Xbox exclusives, according to a newly unsealed email. Microsoft counsel revealed the exchange between Ryan and Chris Deering, former CEO of Sony Computer Entertainment, discussing the announcement of the deal last year.â (June 22, 2023)
Microsoftâs gaming chief: âWe are exactly like Polaroidâ
From: Phil Spencer
Sent: Friday, February 15, 2019 12:06 PM
To: Catherine Gluckstein
Subject: RE: xCloud (Strategy and GDC)
I think you and I talk past each other on this one a lot so I'll try to write up my pov so we can align.
First, we are exactly like Polaroid. We are core gaming which isn't growing it's TAM (analogous to film photographers) while mobile gaming MAU is growing WW at a significant rate (like digital photography was growing).
We have no strategy to win organically in mobile gaming. I can't come up with one. The only thing we could do is close all the Xbox stuff and with the same OPEX try to start a mobile gaming company inside of MS. This is kind of what BobbyK is trying to do at ATVI.
So you and I have to center on that. Our strategy with mobile is just a hope, there is nothing that gives us insight that this will work. The customer there isn't asking for what we are going to offer.
That said, there are a couple of data points that give us a glimmer of hope. More core games like PUBG, Fortnite and a slew of Chinese mobile games are way more like core PC/console games than they are like traditional mobile games (candy crush, clash royale etc) but still the vast majority of non-Chinese mobile gaming revenue is in areas where we have no strength.
Because of this our solution here is not customer led really, it's led by what we have and a hope. I don't like this but I'm not smart enough to come up with anything else. If I ask mobile gamers what they want, they won't tell me that it's to play Halo on their phone with a BlueTooth connection to an Xbox controller. That's probably as far from what they want to do on their phone as anything. They also don't pay for any games, all the mobile games are F2P. So even the business model around our games that mobile players don't want is wrong. The whole this is Xbox led, not customer led and yes that's wrong. We don't get some asks from our console customer to play games away from their console, that's the most aligned signal we have but like Amy's push, this is building the gold seat (for our existing TAM). It doesn't help us grow.
As I said, the only other option I can come up with is stop what we are doing and either leave it at that (save the money) or maybe try to buy some IP (WB?) with the savings and start building mobile games based on known IP or buy a company like Nexon and try to scale into global mobile gaming since that's the TAM that is growing. I don't think we can do WB and/or Nexon in addition to Xbox so it's an either/or with what we are doing now in my mind.
So in that context I think our first mobile Xbox customer is a console gamer who already knows the content, already knows the controller and is willing to be an early adopter on a franken-scenario and is willing to pay something to play. I think our only hope is that core gamers find this scenario interesting. If they don't find it interesting I don't think there is any way a mobile only player is going to find it interesting. That's our first path dependent step.
Second step is that our current game developers/studio partners will want see the increased engagement and start to program for it and find it accretive to their business.
Third step would be that now that we have play happening on a mobile device we can bring more mobile based games into the fold (local or streamed) via XGP and start to build our control plane on mobile. This is kind of what Fortnite is doing.
Fourth would be that we win when all developer adopt your development platform đ
But that first step is us manufacturing (mostly) a customer scenario based on our assets of content, community and cloud.
I do believe that in the end cloud based XPA games will win but I think that game will be way more casual than anything we have today. Just like even today Minecraft is bigger than Fortnite but kind of ignored by most of the media/core. Same with Roblox. It's likely something like those that will become the true instantiation of our vision, not RDR5 everywhere.
So I agree with you, my xCloud deck is a "what do you have to believe for us to win" not a "what does the growing TAM of mobile gamers want.
Phil
[This document is from FTC v. Microsoft (2023).]
Microsoft exec: We could "go spend Sony out of business"
From: Matt Booty
To: Tim Stuart
Sent: 12/17/2019 9:49:11 PM
Subject: RE: GP ARPU
Thanks for sharing.
A lot to digest here. Will read it in detail.
A different view to the general view below might be that we (Microsoft) are in a very unique position to be able to go spend Sony out of business. If we think that video game content matters in 10 years, we might look back and say, "Totally would have been worth it to lose $2B or $3B in 2020 to avoid a situation where Tencent, Google, Amazon or even Sony have become the Disney of games and own most of the valuable content."
For example, it is practically impossible for anyone to start a new video streaming service at scale at this point. What content do you base it on? Things like Hulu and CBS All Access will be trivial players in the space. In games, Google is 3 to 4 years away from being able to have a studio up and running. Amazon has shown no ability to execute on game content. Content is the one moat that we have, in terms of a catalog that runs on current devices and capability to create new. Sony is really the only other player who could compete with Game Pass and we have a 2 year and 10M subs lead.
If we reverse course on day and date, it's going to be hard to convince folks that things like Mixer or Xcloud have much of a chance of surviving scrutiny either.
[This document is from FTC v. Microsoft (2023).]
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