Xbox's Matt Booty: A Different View Might be That Microsoft Go Spend Sony Out of Business - News
by William D'Angelo , posted on 02 July 2023 / 6,200 Views
The head of Xbox Game Studios Matt Booty in an email sent to Xbox CFO Tim Stuart in 2019 was looking at acquiring more studios and to potentially outspend Sony out of the gaming business.
"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," reads the email from Booty via The Verge.
"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 services at scale at this point. What contend do you base it on? Thing like Hulu, 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 catalog that runs on current devices and capacity 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."
Since this email was sent, Microsoft acquired Bethesda's parent company ZeniMax for $7.5 billion and are in the middle of trying to acquire Activision Blizzard for nearly $70 billion.
It has also been revealed Microsoft one point had considered acquiring Sega, Bungie, IO Interactive, Zynga, and more. Bungie is now owned by Sony and Zynga is owned by Take-Two Interactive.
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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Microsoft's approach to eliminating competition and establishing monopolies by any means seems to be in its DNA.
But they haven't acted on this. As the article notes, they looked at and passed on buying "Sega, Bungie, IO Interactive, Zynga, and more." I see no evidence that this has been Microsoft's approach to eliminating competition since Bill Gates retired.
I didn't say Microsoft stopped considering those companies. But the preponderance of evidence shows that Microsoft is not engaging in a full foreclosure strategy when it comes to PlayStation. Evidence includes:
- Deathloop
- Ghostwire; Tokyo
- Elder Scrolls Online
- Fallout 76
- Minecraft
- Minecraft Legends
- Psychonauts 2
- free PS5 upgrade patch for Doom Eternal
- and more
We know in the case of any publisher that has been purchased, that Microsoft actively considered bidding on, that they passed on that opportunity. They were considering Bungie at one point, apparently, and passed on that one at a minimum.
And I'd argue going after ABK was choosing that opportunity over all others, as (if that deal goes through) the odds of them making another acquisition anytime soon is now near zero.
We don't know they passed on those opportunities. They may have just been outbid or not fast enough.
And, again, you are arguing something that has not been stated. Regardless of whether they do or don't there is nothing that currently states they aren't still considering these purchases. Especially since they've said they are interested in more acquisitions
You said they "looked at and passed on". That's what I'm arguing and I stated that clearly. I even used quotes. My point does refute what I'm intending to refute, which is that MS did not necessarily pass on these as potential mergers. Outside of the ones that were purchased by someone else already, of course.
The very next comment I subsequently clarified:
"I didn't say Microsoft stopped considering those companies."
The very next comment after that I further clarified:
"They passed on that opportunity at that time. I didn't state (or mean to suggest) that it was a one-and-done opportunity. Very little is one-and-done in business."
What can I do to help us move past your interpretation of that first comment?
But then you doubled down by saying they passed on that opportunity at the time. We don't know if they passed on anything. At all. They could literally right now still be considering purchasing any of those others after this acquisition, particularly if it goes through. Just because they didn't purchase them at that time doesn't mean they've passed on anything.
The very next comment I subsequently clarified:
"I didn't say Microsoft stopped considering those companies."
The very next comment after that I further clarified:
"They passed on that opportunity at that time. I didn't state (or mean to suggest) that it was a one-and-done opportunity. Very little is one-and-done in business."
What can I do to help us move past your interpretation of that first comment?
The facts show they didn't act. They have continued to support Minecraft Bedrock, ESO, and F76 on PS. They released Psychonauts 2 on PS4 when they didn't have to. They releases a free PS5 upgrade patch for Doom Eternal when they didn't have to. They released Minecraft Legends on PS when they didn't have to.
The facts objectively prove that Microsoft is not acting on a full foreclosure strategy with Sony/PS.
$70B of that is spent without the intention to foreclose Sony and extend reach on Nintendo. Jim Ryan is not even concerned about that happening.
And with the previous acquisition, they did respect any existing contract with Sony including delivering 2 timed exclusives for Sony ANd they included many Bethesda titles on PS subscriptions since.
Year right, sure looks like MS is definitely trying to spend Sony out of business.
Seems to me MS is focused on growing Xbox and GamePass with very little regard for PlayStation whatsoever with those acquisitions.
Microsoft bought Bethesda, and rather than foreclosing on Sony they met their contractual obligations to release Deathloop and Ghostwire as PS timed exclusives.
And they've continued maintaining Fallout 76 and Elder Scrolls Online.
And they brought out Psychonauts 2 on PS4, when there was no requirement for them to do so.
And they released a substantial free PS5 upgrade for Doom Eternal... at a time when Sony was charging their fans $10 for PS5 patches.
So yes, you better believe that I don't think Microsoft is acting on any kind of broad-based foreclosure strategy with Bethesda. Starfield was the only title narrowed down to just Xbox/PC/streaming, but Sony was negotiating to make that a PS exclusive (and perhaps literally just a PS exclusive, not even PS and PC?), so any Sony fans complaining about that would be pretty hypocritical IMO (not saying you're a Sony fan and/or a hypocrite, just speaking generally). And honestly, a game of this scope, and with Bethesda's history of buggy RPG releases at launch, narrowing this game's scope probably helped development. Oh, yeah, and Indiana Jones, whenever that's coming out. We don't know about a 5+ years out Elder Scrolls, or an even further out Fallout.
Bethesda was at risk of becoming a Sony second-party. They'd done exclusivity on Deathloop and Ghostwire, and were negotiating for Starfield. Given Bethesda's big releases are so many years in the making, and Sony being the biggest player in the home console market (so needing the smallest payments to get exclusives), that created the risk of them becoming just a Sony partner.
He's saying "I know we're doing X, but it would also be possible to do Y." He's literally talking about an approach that they are not taking. That's the whole point of the statement he's making in this email.
Yip,
No innovation, no new tech, no creativity.
MSFT deals with competition by outspending them, under cutting them, cross subsidising losing divisions. Basically MSFT crush’s competition in any sphere through the profits from office/windows/azure
They used to do that, under Bill Gates. When was the last time they did that? They didn't do it with Windows phones (the Nokia purchase was defensive, as Nokia was already only making Windows phones). They haven't done it with Xbox (despite Starfield and Indiana Jones, Bethesda has continued to support PS in a variety of ways). I can't remember the last time Microsoft bullied themselves into an industry. Maybe Internet Explorer vs. Netscape Navigator? And that was under Bill Gates, not under current leadership.
And people want this deal to be success!?
MS is willing to burn money to destroy competition! They have Azure, they have content and they have trillion dolar levels of money!!! They will become too f@#$ strong If the ABK deal comes to life, this will not be good for game industry at all!
Microsoft has a 2.44 Trillion dollar market value verses Sony 114 Billion.
Microsoft is 21 times more valuable than Sony.
However Microsoft only has 104 Billion dollars in the bank and brings in 207 Billion in revenue per year with 380 billion in assets.
Remember market cap isn't the amount of money Microsoft has, it is what investors think Microsoft is worth.
When was the last time they did that. IE vs. Netscape? Microsoft doesn't routinely do that kind of thing anymore. They've spend 22 years growing their Xbox business all the way up to 16% marketshare. Doesn't sound like they're burning money to destroy competition.
Teams is a free product, and it's main competitor is also free. This is IE vs. Netscape Navigator all over again. Should MacOS not come with Safari? Should iPhones not come with Apple Arcade installed? Should Android phones not come with Google Maps pre-installed? I have no problem with an OS coming pre-installed with a free download (so long as it's deletable by an end-user who doesn't want it).
https://petri.com/microsoft-separate-teams-office-eu/
Not here to discuss what comes free with what. Teams is part of Office (a paid for product), most businesses that already pay for office get it and so MS are using their monopoly on Office to boost use of Teams. Regardless of if there is a free version of it or it's main competitors have free versions, this is what they are doing and like many things it's leading them into trouble.
Teams is a free download. If they choose to include a free download with Office, then that's what they do.
Office also is available completely for free, in its webapp form. The mobile app versions of Office are also available completely for free. In other words Teams and Office are both available in free and premium forms.
So I don't think the way you've characterized either Teams or Office is correct. It'll be interesting to see if Microsoft actually gets in trouble over this. I'm not saying they will or won't, I haven't read the arguments on either side yet. I was merely pointing out that what Microsoft is doing is routine in the industry, not Microsoft doing something untoward.
Basically they are using the money they got from being a monopoly of the PC operating system: Windows to outspend where no one can match them and become another monopoly in the gaming industry.
Basically they can keep on creating their own monopolies in whichever industry they like when they can throw tens of billions into buying everyone.
Windows is a legacy product. Windows revenue is down to only 11% of Microsoft's total, and continues to decline every year.
If Microsoft is planning to spend their way into a monopoly in the gaming sector, they have a funny way of showing it. They've been at it for decades (Xbox since 2001, and computer gaming since 1979) and they're still a tiny bit player in both.
Microsoft is also not a monopoly in PC. They're the biggest player by far, but not a monopoly. I'm typing this post on a PC that doesn't run Windows (a Macbook) as proof. And SteamOS is a real long-term threat to Windows, I'd argue, with the success of the SteamDeck.
Steam dwarfs Microsoft in PC gaming, Microsoft is still a distant third place in the console race, and they have next to no presence in the fastest growing gaming segment (mobile). So with respect, every claim you make in your post is objectively false.
"If Microsoft is planning to spend their way into a monopoly in the gaming sector, they have a funny way of showing it." You're not keeping up, the history of the product has completely changed, the past is now irrelevant. You might want to browse over some of the court docs and emails. That's exactly what they're planning on doing.
You know what's a funny way of showing it? They're spending more on a single M/A than the entire Xbox division has made in profit over 21 years. That's when the alarm bells go off. The entire business blueprint just got thrown out the window. They're also not a "tiny bit" player. They make more gaming revenue than Nintendo currently and this will put them ahead of Sony.
Look at what they're planning. They want to be market leader by 2030, capture and hold the emerging sub market and then use the sub revenue to reinvest in a level of content their 'competitors cannot financially afford' (ala Netflix vs Hulu) That's a company gunning for top and total control of market. They mention reaching a potential of 250 million Gamepass subs in existing markets ($4 billion a month) with broader reach to 750 million ($12 billion a month). At that point, they control everything. All marketing rights, all leverage, studios and IP. That's end game, you're a monopoly, completely untouchable.
Can they achieve it? Who knows. There's nothing wrong with any of that. It's purely business. But we're not for a second going to pretend MS is happy sitting in third, or aren't currently making a play to disrupt and completely dominate the entire gaming market.
I have been keeping up on the court proceedings, and saw no evidence that Microsoft plans on doing any such thing. I read an email from Matt Booty from 2019 that noted they COULD engage in such a strategy. It seems you are incorrectly assigning Matt Booty's musings with Microsoft's corporate strategy. And given their actions since, there's no evidence that his bosses agreed with him or have been doing so. In fact, there's ample evidence otherwise (Minecraft, Minecraft Legends, Psychonauts 2, Ghostwire: Tokyo, Deathloop, PS5 upgrade patch for Doom Eternal, and more).
I'm not talking about Matt Booty's comments, that should be obvious. If you're keeping up, you should know I'm talking about the strategy for Gamepass outlined in the redacted documents. It's draws direct parallels to the movie streaming industry and shows they want to mirror Netflix's approach, use early consolidation advantage to be able to continuously outspend the competition and maintain market dominance.
So, from the horses mouth, we have a strategy that justifies whey they're actually spending $80 billion in a complete 180 for the whole division. Your counter point, is that we should ignore the internal evidence, and instead extrapolate their corporate strategy from a few recent game releases, some of which were already on PS, some that had contractual obligations, and a patch?
Your observations about my comments don't appear internally consistent. On the one hand you indicated (in an insulting tone, no less) that I have failed to understand you were talking about the redacted documents, but then say my counterpoint was about the redacted documents. You can't have that both ways.
But anyway, there's no "early consolidation advantage" in the games console industry, as it's existed for over 45 years.
Microsoft has committed to allowing anyone to stream Microsoft's game properties on any streaming service, so there's no consolidation strategy there. That's the opposite of consolidation.
Microsoft has committed to keeping Call of Duty on PS and to expand it to Nintendo. Expanding Call of Duty to Nintendo and to streaming is also the opposite of consolidation.
Buying Bethesda but keeping their back-catalogue available, releasing PS updates for ESO, F76, and Doom Eternal is the opposite of an aggressive consolidation strategy. So is releasing Psychonauts 2 on PS.
Releasing every single game Microsoft publishes on Steam is the opposite of a consolidation strategy, since Steam is a rival PC game distributor to the Microsoft Store and PC Game Pass. They've already been doing that, and they're now proposing to do that with all ABK games too.
So, yes, I absolutely believe that Microsoft's actions rebuke your assertions..
The games industry is much more dynamic than film and television. Almost anyone can start an indie game studio and build it into something bigger, but good luck starting an indie movie or TV studio and getting your content in front of lots of eyeballs. So the idea of ever consolidating the game industry to that degree doesn't seem possible to me. When was the last time a studio as small as the one behind "The Abyss" had a movie or TV show as big as that game?
So I don't see Microsoft following the proposed strategy in the redacted documents. I referenced Matt Booty's comments because your comments seem closer to his email to me than the redacted strategy documents.
The true face of microsoft, where the people at that downvoted everything in other thread talking about this evil corpo saying it was fake news?
Oof this evidence doesn't look good for Microsoft. Microsoft buying Bethesda and potentially Activision Blizzard is putting themselves to that Disney position, which contradicts their argument against the FTC and CMA. In addition to saying that they can spend Sony out of business is not a good look. Microsoft has the potential to become a monopoly with cloud service controlling high-performance consoles, PC, and now mobile. Nintendo is yet again excluded further proving that Nintendo is just its own thing now from their perspectives. Nintendo was the Disney of gaming, but instead of acquiring others, they took a different approach. That is admirable.
MS is not even close to being a monopoly in any of the varies sectors in gaming, let alone in all of the varies sectors like you are suggesting could happen. The term monopoly is being thrown around so losely, it really makes me think people have no idea what it would actually take for MS to have a monopoly in gaming. I can say in all certainty, this deal going through wouldn't cause a monopoly, even if they made CoD exclusive, which isn't going to happening.
A monopoly is defined as a single seller or producer that excludes competition from providing the same product. Matt Booty mentioned Disney's position and owning most of the valuable content. That's exactly what Microsoft is pushing towards. Acquiring major content holders and controlling them to become industry leaders. Do you think it will end with Activision Blizzard if it goes through? Their 2030 Xbox gaming plan states that they are aiming to become the top spot in the market. If cloud gaming is the future, they will have a monopoly because no other company can compete with a cloud service other than Amazon or Google. But if Microsoft is able to get a hold of the "valuable content" first, they can exclude competition. That's what he means by avoiding the situation where Amazon and Google own most of the valuable content. Instead of modern Disney, they're trying to attempt a scenario if Disney did streaming service before Netflix. That's a monopoly.
By 2030 MS wants Xbox to double its revenue. That still wont make them a monopoly if they achieve that. Not in any market of gaming.
Other companies will be trying to reach their own revenue goals as well.
Cloud gaming is hardly a money maker as is. Cloud gaming may end up fizzling out in the next 10 years and reach its peak ceiling. Xcloud is only as popular as the number of Game Pass Ultimate members right now. If it required it's own subscription, those number of active xcloud users would decrease significantly. Regardless of the CMAs argument about xcloud, it's too unpredictable to say it will be anything big. It will never be the money maker mobile gaming or console gaming is now.
Apparently they later stated they never pursued this strategy and that it's unrelated to the acquisition. Seems like a bit of a stretch.
They're lying.
Have you guys played totk yet? Such an amazing game.
No, but I DID just eat a bowl of Cheerios!
I don't think i've tried that. What do you rate it?
Solid seven out of ten. Had to eat it with oat milk, otherwise would have been higher.
I think Sony has enough quality first party studios to stay in business even if MS bought up all the third parties.
I agree with you but MS already has more studios and money than Sony & Nintendo put together so they don’t need the ABK deal!!!!
I got down voted to hell and back when I stated everyone should be alarmed at Microsoft, 2.51 trillion market cap, is doing by trying to take out Sony with its 122 billion market cap, in another post.
Well I guess FACTS open up eyes sometimes.
No one should be for this deal. I get the Sony does things but they are not trying buy out publishers with multiple games that have been on multiple platforms for decades now and taking them exclusive. I can see my PS3 copy of Skyrim on the shelf behind me. Starield was going to be on the PS5. How much more evidence does the FTC or any other body need to block this deal.
I'd do the same if I owned a company and had the money.
Smoking gun
well Booty is the head of Xbox studios so that's a great resume.
"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"
MS keeps buying company after company. MS is the Disney of video games...
MS is the Disney of video games? I don't think anyone actually believes that.
Yeah, Nintendo is like old school Disney while MS is like modern Disney (or the closest thing at least)
Microsoft and Sony fighting like school kids
Meanwhile Nintendo is like "buy pikmin plz"
Considering Sony, during those same late last gen years, tried to leverage their position as market leader to put Xbox out of business, with numerous attempted and successful AAA 3rd party timed moneyhat deals, Xbox was only fair to consider using their much larger reserves of cash to take the fight more directly to Sony.
Having deals with publishers to get games half to one year exclusivity = buying two publishers that combineed have like 50 plus ips , preventing like 15 games in a gen to release in a console that if not for exclusivity they would sell two or three times as much.
Nothing Activision is going exclusive my dude.
And i am the pope.
I doubt that. MS will likely make smaller franchises or new IPs exclusive. Phil has even said as much. CoD is the only game MS has said they will keep multiplatform.
You should read Sony's History in gaming instead of being so blind sided. Like how they where able to out price Sega while going after the same market and using their celebs from their music and movie labels to promote the PS something Sega and Nintendo Couldnt do at the time. Long history there that Some sony fans seem to like to skimp over or act like it didnt happen. I dont get why they are surprised that a bigger whale ended up entering the market and planned at one point of doing to Sony what Sony wanted to do to Sega and Nintendo themselfs.
Most of you getting upset fail to understand this is business as usual. Every business has a list of potential acquisitions and some form of a plan or discussion to put a competitor out of business or atleast harm the compitition, which is a nice way of saying it. Sony has their own tactics to push competitors out of the market. If you don't think higher ups at Sony haven't had discussions about, "what can we do to push MS out of the gaming market?" then you're naive. Jim Ryan isn't trying to block the deal out of the goodness of his heart. He's doing it to protect Sony's position in the gaming market. The end. There is a reason why the judge tossed this.
If you look at the profiles of the ones getting upset i think its easy to see their reasoning or lack of..
Matt Booty proving he is so clueless , that he has no business being near the top of any 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.”
That a measly 2-3 billion lost would somehow help prevent other big companies from being the Disney of games, is so absolutely clueless. I don’t even know how to start.
Why is Matt Booty still at Xbox, or anywhere else.
As for Xbox spending Sony out of Business, well that is Nintendo & Sony Business model for decades. Also, it just sounds like wishful bragging from someone who wants to be heard by higher-ups….as a go-getter.
