Xbox’s fundamental strategy is coming to light, as Matt Booty (head of Xbox Game Studios) and Tim Stuart (Xbox CFO) reveal the truth in a 2019 email…

Stephen Totilo, writing for Axios, posted on Twitter the exchange in question: “We [Microsoft] are in a unique position to be able to go spend Sony out of business. Let’s think that video game content matters in 10 years. We might say, ‘Totally would have been worth losing $2 billion or $3 billion 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.’

Google is 3 to 4 years away from being able to have a studio up and running. Amazon has shown no ability to execute game content. Content is the one moat regarding a catalog that runs on current devices and can create new ones. Sony is the only player who could compete with Game Pass, and we have a 2-year and 10 million subs lead,” reads the exchange. Google has since pulled out of game development (the conversation was when Google Stadia existed), and Amazon isn’t much better off.

There’s also another message that passed between Phil Spencer (the Xbox CEO) and Stuart: Microsoft has given lower priority to Xbox Series production, and Game Pass, cloud gaming and acquisitions have been given more focus: “From a strategy perspective, I believe in our trade-offs for Cloud and Content in gaming over console volume. I would love to invest in all unconstrained, but I completely support our trade-offs. […] I realize there are many decisions on spending, COVID-19 impact on gaming release dates, [Xbox Game Pass] content investments, etc. I believe in the trade-offs we are making for our long-term goal, but there are near- and mid-term consumer engagement and console unit volume trade-offs,” they wrote.

The US Federal Trade Commission, the FTC, is seeking a temporary restraining order in court (with antitrust hearings coming up in August) to stop Microsoft from closing the $68.7 billion deal that would give it the Activision Blizzard King. Totilo also shared a document related to the case on Twitter. According to Microsoft’s lawyers, Project Q, the recently announced Remote Play handheld, will be a portable PlayStation 5 launched in the US for less than $300. The price is too high for the features announced so far because it’s not supposed to run games locally. We don’t know much about the gadget yet (8″, 1080p display, DualSense adaptive triggers, and haptic feedback, and it only works when on the same network as a PlayStation 5), so Sony should clarify what the machine can do…

In November 2020, Spencer emailed Amy Hood (Microsoft’s CFO) and Satya Nadella (Microsoft’s CEO) with a proposal. What if SEGA were to be acquired? The Verge has obtained an internal email that Spencer wrote about the Japanese company: “We believe that Sega has built a well-balanced portfolio of games across segments with a global geographic appeal, and will help us accelerate Xbox Game Pass both on and off-console. Sega is the most attractive next acquisition target due to its global PC catalog, presence on mobile in Asia, and global brand affinity on console through its classic IP.” The email also surfaced in the Microsoft-FTC injunction case.

Nadella’s response is not known, but the April 2021 Microsoft list (the M&A final watchlist) of companies targeted for the acquisition included SEGA along with Bungie (acquired by Sony), Zynga (known for FarmVille, acquired by Take-Two for $12.7 billion), IO Interactive (Hitman, Project 007), Supergiant Games (Hades) and Niantic (Pokémon Go). Thunderball, Playrix, and Scopely were also under consideration.

Looking at this list, it is all about who has the bigger p… wallet.

Source: WCCFTech, WCCFTech, VGC