A Game (Pass) with No Winners (Premium)

This past week, the U.S. Federal Trade Commission (FTC) filed a complaint with a U.S. Appeals Court explaining that Microsoft's controversial recent Xbox Game Pass changes constitute "consumer harm." There's a lot to unpack here. But the FTC assertion is incorrect in every regard. Which is a shame, because everything Microsoft has done this year with Game Pass is, in fact, wrong too.

I'll start with the FTC.

Since losing its bid to halt Microsoft's $68 billion acquisition of Activision Blizzard—twice, mind you—the FTC has taken the unprecedented step of continuing its legal challenges in an attempt to unwind the merger ex post facto. This week's filing is the most recent example of the agency wasting taxpayers' money, but it's not the only one: The FTC previously argued that Microsoft shouldn't be allowed to lay off any of the 10,000 former Activision Blizzard employees it subsumed despite the obvious and expensive redundancies that occurred when it literally doubled its videogame head count. As I noted at the time, the FTC never expressed any concerns about Activision Blizzard's employees during its year-long battle to stop the merger. And as Microsoft noted at the time, Activision Blizzard would have laid off many employees itself had the merger collapsed.

To the consumer harm bit, recall that the FTC's goal is to unwind the Activision Blizzard acquisition. That is, we must view the complaint in that light: Had Microsoft not acquired Activision Blizzard, would it have made these changes?

As the FTC points out in its filing, and as I wrote in Microsoft Turns Game Pass Into a Hard Pass (Premium), Microsoft quietly revealed via a support document that the cost of Xbox most popular Game Pass tier, for Console, with a new Game Pass Standard offering. The FTC refers to this offering, which is 36 percent more expensive than the Game Pass for Console subscription, as "a degraded product" because it no longer includes Microsoft Studio day-one releases. This, the FTC alleges, "is exactly the sort of consumer harm from the merger the FTC has alleged."

Except that it isn't. What the FTC left out here is as important as the information it provided to the court: Game Pass Standard also differentiates from the previous Console tier by adding online console multiplayer capabilities. Those who subscribed to Game Pass for Console had to also subscribe to Game Pass Core (previously Xbox Live Gold) to get that functionality. And Game Pass Core cost $59.99 per year (or $9.99 per month) before last week's price hikes. When you consider that Xbox Game Pass for Console was $10.99 per month before the changes, the cost of the two together was $15.99 to $19.99 per month, depending on how you paid for them. And so the changes, which include Xbox Game Pass Standard at $14.99 per month (multiplayer, console only, no day-one guarantee) and Xbox Game Pass Ultimate at $19.99 per month (multiplayer, console + PC + cloud gaming, with a day-one guarantee)...