Nadella, Microsoft CEO, Expresses Desire to Eliminate Console Exclusive Games

Microsoft CEO Satya Nadella expressed his desire on Wednesday to eliminate exclusive agreements between video games and popular gaming consoles.

Nintendo and Sony, Microsoft’s larger gaming rivals, often release exclusive titles on their devices to attract customers in a competitive market. Microsoft also employs this strategy for its Xbox, although Nadella mentioned that his company is a “minor player” in the console market.

Regarding exclusive deals, Nadella said, “I have no affinity for that approach.”

Nadella delivered these remarks during a hearing in federal court in San Francisco, as the Federal Trade Commission seeks legal support to prevent Microsoft from completing its $68.7 billion acquisition of video game publisher Activision Blizzard. The FTC is concerned that this merger could allow Microsoft to withhold popular games in Activision’s library from other consoles or diminish the gaming experience for those games on other platforms.

Microsoft intends to include Activision games in its Game Pass subscription service. To address regulatory concerns, Microsoft has offered 10-year agreements to ensure that Sony and Nintendo consoles have access to Activision’s popular Call of Duty titles.

However, Sony has not accepted Microsoft’s offer and is opposing the acquisition of Activision.

“I believe that this transaction is detrimental to competition,” remarked Jim Ryan, head of Sony Interactive Entertainment, in a video deposition played in court on Tuesday.

Nadella’s perspective on consoles reflects his broader approach to technology platforms. Since becoming CEO in 2014, he has transformed the culture at Microsoft, a company once renowned for its closed systems, by focusing on ensuring the compatibility of its software with multiple devices, not just its own hardware.

Microsoft has made its Office productivity applications available on Apple’s iPad and its SQL Server database software accessible on Linux. In previous years, Windows was the primary source of revenue for Microsoft, but it currently represents just over 10% of the company’s overall revenue, down from about 25% in 2011.

A Microsoft spokesperson stated that Nadella’s comments on Wednesday “clearly indicate that Microsoft will uphold its commitments to its partners and the gaming community, aiming to bring more games to a larger audience.”

Nadella also acknowledges that Microsoft faces challenges in the gaming industry. He stated that Microsoft’s cloud service, which is available through Game Pass Ultimate subscriptions, is currently inadequate as a replacement for existing gaming platforms.

Activision CEO Bobby Kotick generally holds a skeptical view of multi-game subscription services. In court on Wednesday, he mentioned that his company has experimented with such services, including collaborating with Nvidia’s GeForce Now during its testing phase.

Despite differing opinions on subscription models and their potential, Kotick, whose company is headquartered in Santa Monica, California, still wants to complete the deal with Microsoft.

“Perhaps part of my perspective comes from being in Los Angeles and witnessing major media companies migrate their content to these subscription streaming services, resulting in adverse business outcomes,” Kotick explained.

Judge Jacqueline Scott Corley will determine whether the FTC will receive a preliminary injunction to halt Microsoft from finalizing the deal. Meanwhile, in the U.K., the Competition and Markets Authority took steps to block the transaction back in April.

“If the preliminary injunction is granted, my board does not see how the deal can proceed,” Kotick stated.

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