san francisco — Microsoft CEO Satya Nadella will appear in court on Wednesday to defend the company’s proposed $69 billion acquisition of video game maker Activision Blizzard against an attempt by federal regulators to block the deal.
Both Nadella and Activision Blizzard CEO Bobby Kotick are scheduled to testify before US District Judge Jacqueline Scott Corley on the fourth day of court hearings in San Francisco. The move has the potential to make or break the costliest acquisition in technology history.
The hearing represents a major test of Big Tech oversight led by FTC Chairperson Leena Khan, who has been vocal about her belief that US regulators were too lenient in past deals, allowing companies like Amazon, Google and Helped in increasing the power of Facebook. The court spat with Microsoft comes six months after the FTC took Facebook owner Meta Platforms to court in Silicon Valley for trying to block its acquisition of a virtual reality fitness company, but was rebuffed by the judge in that case. .
Microsoft, maker of the Xbox console, has hailed the deal with Activision Blizzard as a way to make popular Activision games like Call of Duty more widely available. But federal antitrust enforcers, as well as Microsoft’s main gaming rival Sony, have argued it would harm competition.
The US Federal Trade Commission is trying to persuade Corley to issue an order that would block the acquisition from completion before a more comprehensive administrative trial begins on August 2 in Washington. Microsoft is struggling to complete the deal before a July 18 deadline, which could cost Activision a breakup fee of $3 billion.
Microsoft struck the deal 17 months ago in hopes of expanding its video game footprint beyond Xbox, which has about half the market share of longtime industry leader Sony and its PlayStation devices.
The FTC is fighting to block a deal it fears will allow Microsoft to corner popular franchises like Call of Duty and World of Warcraft for Xbox and online subscription services, which are worth $210 billion in video revenue worldwide. are fast becoming a big part of the game. market. The sector is already bigger than the film and music industries combined.
The court also heard this week from Sony Gaming executive Jim Ryan, whose testimony came from a videotaped deposition.
On the record in April, Ryan said he initially expressed little concern about the acquisition after private talks with Kotick and Xbox chief Phil Spencer. But Ryan said he later became convinced that Microsoft would take advantage of Call of Duty’s popularity to hurt PlayStation, especially in the US, where first-person shooting games are popular.
“Having gamers leave our platform and go to Xbox hurts (Sony),” said Ryan, CEO of Sony Interactive Entertainment. Even if Microsoft has followed through on its pledge to keep the game on PlayStation, Ryan said there could still be “some kind of poor experience for PlayStation gamers.”
Microsoft has accused the FTC of ignoring pressure on the company’s gaming division to deliver profit margins that justify the high price it is paying for Activision and if popular franchises like Call of Duty are put on hold. There is likely to be a fierce backlash from highly opinionated video game fans. from other forums.
Harvard University economist Robin Lee, an expert hired by the FTC, testified Tuesday that such a protest would likely be offset by “considerable economic benefits” that Microsoft rivals would gain from access to Call of Duty and other popular games. Can be obtained by stopping. such as allowing Xbox users to obtain older or improved versions of games.
Lee’s testimony prompted the judge to comment Tuesday that “all the testimony in this case is about Call of Duty,” and to ask whether it could differentiate the acquisition from other game industry deals. challenged on similar grounds.
“It’s a unicorn in terms of durability, popularity and numbers,” Corley said. “It definitely comes up.”
Microsoft has pointed to commitments it has already made to make Call of Duty available on Nintendo’s Switch console and Nvidia gaming subscription service as evidence that the Activision deal will benefit consumers.
Microsoft also tried to present evidence that Sony was trying to sabotage the deal in order to maintain its huge lead in the console market.
The proceedings are scheduled to end on Thursday. Another major regulator, the UK’s Competition and Markets Authority, has also taken action to thwart Microsoft’s takeover.
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AP Technology Writer Michael Liedtke contributed to this report.
