Microsoft Filing Claims That Xbox Lost the Console Wars

A Microsoft legal filing in its case against the FTC shows just how badly Xbox has lost the console wars. It’s worse than expected.

“Xbox has consistently ranked third (of three) behind PlayStation and Nintendo in sales,” a Microsoft proposed findings of fact filing reads. “Likewise, for console revenues and share of consoles currently in use by gamers (“installed base”), Xbox trails with 21 percent while PlayStation and Nintendo have shares of [redacted] and [redacted], respectively.”

The conclusion? “Xbox has lost the console wars,” the document states plainly, “and its rivals are positioned to continue to dominate, including by leveraging exclusive content.” The point there being that it is exclusive content that the FTC is so eager to deny Microsoft, despite its distant third-place standing in this market.

To counter this reality, Microsoft has bet on “a different strategy” by which it will generate profits through game sales rather than console sales. So where Microsoft loses money on every Xbox console it sells, Sony and Nintendo both earn a profit on their own console sales. In doing so, Microsoft is “effectively subsidizing gamers’ purchase of the hardware in hopes of making up the revenue through sales of games and accessories.”

“This is going to decide whether the deal goes forward,” said Microsoft lead lawyer Beth Wilkinson said of the hearings.

These revelations came during the first of several days of hearings at the US District Court, Northern District of California in San Francisco. But they weren’t the only bombshells, today: PlayStation chief Jim Ryan, an outspoken critic of Microsoft’s acquisition of Activision Blizzard, undermined his public complaints that Microsoft might take Call of Duty away from PlayStation should the acquisition go through. In emails obtained by Microsoft, Ryan said he had no such concerns and that the deal was not “an exclusivity play” designed to harm PlayStation.

“Today showed Sony has known all along we’ll stand by our promise to keep games on its platform and made clear its work to lobby against the deal is only to protect its dominant position in the market,” a Microsoft spokesperson told me.