Xbox Exec Thought Microsoft Could “Go Spend Sony Out of Business”

The ongoing FTC v. Microsoft hearing continues to be a great source of information on Microsoft’s ambitious plans to push its Xbox business to the next level. In an email sent in December 2019 that’s part of the internal documents from the hearing (via The Verge), Head of Xbox Game Studios Matt Booty said that Microsoft was uniquely positioned to beat Sony by using its enormous treasure chest.

“We (Microsoft) are in a very unique position to be able to go spend Sony out of business,” Booty wrote. “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 $2 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,” Booty.

This email was part of a discussion about Microsoft stopping to make its new first-party games available on day one on Xbox Game Pass. “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,” Booty said. Microsoft eventually shut down its Mixer game streaming service in June 2020.

In a statement shared with The Verge, David Cuddy, general manager of public affairs at Microsoft said that Booty’s ambitious statements about Microsoft’s Xbox business never materialized. “This email is three and a half years old and predates the announcement of our acquisition by 25 months. “It refers to industry trends we never pursued and is unrelated to the acquisition,” Cuddy said.

Still, in another email from November 2020 seen by The Verge, Xbox head Phil Spencer asked Microsoft CEO Satya Nadella and CFO Amy Hood for strategy approval to approach Sega regarding a potential acquisition of its gaming studios. “We believe that Sega has built a well-balanced portfolio of games across segments with global geographic appeal, and will help us accelerate Xbox Game Pass both on and off-console,” Spencer said in the email.

In an internal merger review document from April 2021 seen by The Verge, Microsoft listed potential targets for acquisitions to grow its presence on console, PC, and mobile. While Sega was included in the list, Microsoft also had an eye on Bungie (Destiny 2), IO Interactive (Hitman), and Supergiant Games (Hades). Other targets included mobile developers Zynga (which was eventually acquired by Take Two) and Thunderful.

Ultimately, Microsoft went on to acquire ZeniMax Entertainment/Bethesda for $7.5 billion to bring more exclusive games to the Xbox ecosystem. Last week, Phil Spencer also said at the FTC v. Microsoft hearing that the possibility of Sony signing a PlayStation console exclusivity deal for Starfield was seen as a huge risk for the Xbox ecosystem.

“When we acquired ZeniMax one of the impetus for that is that Sony had done a deal for Deathloop and Ghostwire… to pay Bethesda to not ship those games on Xbox,” Spencer said. “So the discussion about Starfield when we heard that Starfield was potentially also going to end up skipping Xbox, we can’t be in a position as a third-place console where we fall further behind on our content ownership so we’ve had to secure content to remain viable in the business.”

The FTC v. Microsoft hearing will resume later today and it will be concluded on Thursday, June 29. So far, it’s been a fascinating look at how Microsoft’s Xbox division has been operating over the past couple of years.