Nice Guy (Premium)

What a difference two decades makes. Microsoft, once the belligerent brat of antitrust, is now fronting a kinder, gentler face to the world. And it is trying on a new role with the U.S. Federal Trade Commission (FTC) lowering the boom because of the software giant’s attempt to acquire Activision Blizzard: “Nice guy.”

I’ve been around long enough that this phrase still makes me laugh out loud. But let’s acknowledge that the Microsoft of today bears no resemblance at all to the anticompetitive monster that rightfully landed itself in serious antitrust trouble in the U.S. and the EU over 20 years ago. It’s like comparing the Germany or Japan of today to the warmongering nations that launched World War II in the mid-20th century. They’re the same in name only.

Much of the credit for this transformation will be given to Satya Nadella, Microsoft’s CEO since 2014. But the Microsoft of today was actually set in motion by his predecessor, Steve Ballmer. And come on, it’s not like workplace toxicity didn’t continue unabated under Nadella. As in all things, there is a nuanced middle ground to be found here. And with regard to Microsoft’s transformation, we can’t credit, let alone congratulate, one person for this change.

What we can do is marvel at the differences.

In 1997, we were treated to the sight of Bill Gates, then the richest and most powerful man on earth, squirming in his chair for hour after hour during a series of depositions, disingenuously claiming that he couldn’t remember any details about the key decisions he made to undercut the competition and illegally expand his Windows monopoly. But here in 2022, we have Brad Smith, Microsoft’s top legal mind, telling the U.S. government it once violently opposed to “give peace a chance.”

Brad Smith, incidentally, is another example of how Steve Ballmer guided Microsoft’s transformation. Ballmer hired Smith in 2001 specifically to get Microsoft out of its antitrust troubles, and Smith won over the senior leadership team and Microsoft’s board of directors by explaining that it was time for the software giant to soften its approach and make peace with regulators at home and abroad. He was hired, and he did just that, and he’s led Microsoft’s legal efforts ever since.

Smith, featured recently in The New York Times, has approached antitrust regulators questioning Microsoft’s Activision Blizzard acquisition quite a bit differently than his predecessors did 20 years ago. And his strategy is simple: where the Microsoft of the past was previously a put-upon bully, the Microsoft of today is Big Tech’s “nice guy.”

Smith has plied this strategy with each regulatory body that announced investigations of the acquisition, pledging to work with Sony, its chief competitor in videogames, a company that today employs the same exclusionary tactics that Sony says Microsoft will use in the future. It has made the very public case that it has literally addressed all of Sony’s concerns—among other things by assenting to a legally-binding contract to keep Call of Duy on PlayStation for at least 10 years—only to be rebuffed by the market leader, which Microsoft says is really just trying to continue its dominance by keeping Xbox “smaller” than PlayStation.

Sony’s belligerent stance—it has ignored each Microsoft outreach—may come back to haunt it because it proves Microsoft’s point: if Sony were really concerned about the issues it raised with regulators, then it would surely be appeased by Microsoft meeting its demands. But Sony isn’t really concerned with Call of Duty specifically. It is concerned about keeping its only real competitor down.

Also not helping Sony’s case is the fact that Microsoft’s Activision Blizzard acquisition won’t alter the competitive landscape in the slightest: Sony and Nintendo will remain dominant, and Microsoft and Xbox will still be a distant third. The acquisition also won’t harm consumers, since Microsoft will simply continue to make its best-selling games available on as many platforms as possible, either because of consent decrees or simple business sense. As Xbox head Phil Spencer said of Call of Duty, it would be economic suicide. Keeping the franchise only on Xbox “would simply not be profitable.”

Yes, Sony, the FTC, and probably many gamers have concerns that Microsoft could do something bad, might take a favorite game away from the platform they prefer. And while they can cite a few examples of this with minor titles, there are bigger and better examples of Microsoft being a good steward of cross-platform games—Minecraft, anyone?—and, perhaps, as important, the historic record: Sony, for all its woe-is-me posturing, has a much richer history of keeping its games off of Xbox and other platforms and, even worse, of abusing its dominance by requiring third-party PlayStation developers to specifically ignore Xbox. Oops.

Several individuals have pointed out to me that consolidation is “bad,” which is an almost moral stance that has nothing to do with the law: antitrust regulation doesn’t exist to prop up uncompetitive companies or markets. No one stepped in when Windows Phone failed, for example, because having just two major smartphone players, Apple and Google, was “bad.” Consolidation, whatever one thinks of it, is a natural, common, and inevitable occurrence in successful, mature markets. The personal computing market we enjoy today was once a mess of incompatible products from long-forgotten companies like Commodore, Tandy, Atari, Texas Instruments, and many others. That market consolidated into two major platforms over time as well.

The videogame market, however, will remain more diverse than that of PCs or smartphones should regulators OK the Activision Blizzard acquisition, and no less diverse than it is right now. But what we’ll have on the other side is a better steward for the company’s many brands and franchises, one that is incented to do what Microsoft has always done under Mr. Nadella by meeting its customers where they are. This effort, too, started under Steve Ballmer—you don’t really think Nadella started as CEO and Microsoft magically announced Office for iPhone just a few months later, do you?—but whatever. As the current face of Microsoft, and the standard bearer for what Microsoft is today, Nadella has pushed this worldview, that for Microsoft to thrive, it needs to be more open. And acquiring Activision Blizzard is another example of this push, not a refutation of it.

Microsoft is the world’s second-largest company by market cap, and it’s not perfect. But compared to the truly rapacious Big Tech firms of today—Amazon, Apple, Google, and Meta—Microsoft is very much the “nice guy” of the group.

Granted, it’s a low bar.