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25th Jun 2023

The Console Wars are over as Xbox admits defeat to PlayStation

Steve Hopkins

The company is arguing its Activation Blizzard deal is necessary to stay competitive

Microsoft has reportedly conceded that it has officially “lost the console wars”.

In a document submitted in its court battle with the Federal Trade Commission (FTC) over the $69 billion acquisition of Activision Blizzard, Microsoft admitted it had lost to rivals Playstation and Nintendo.

The FTC wants to block that acquisition through an injunction, claiming that Microsoft – through owning the huge games production company – is likely to “have the ability, an incentive, to harm competition in various markets related to consoles, subscription services and the cloud (for gaming).”

According to a report by IGN, the company described its entry into the gaming industry in 2001, when its original Xbox console was outsold by both Sony and Nintendo by a “significant margin”.

And since then, it hasn’t stopped “losing” the “console wars” ever since.

“Xbox’s console has consistently ranked third (of three) behind PlayStation and Nintendo in sales,” IGN quoted the document as reading.

“In 2021, Xbox had a share of 16 per cent while Nintendo and PlayStation had shares of [redacted] and [redacted], respectively. Likewise for console revenues and share of consoles currently in use by gamers (‘installed base’), Xbox trails with 21% while PlayStation and Nintendo have shares of [redacted] and [redacted], respectively.”

Microsoft goes on to argue that as a result, it is “betting on a different strategy”, making a profit through game sales rather than consoles, which it will sell at a loss, “effectively subsidising gamers’ purchase of the hardware in hopes of making up the revenue through sales of games and accessories.”

If the FTC succeeds with its injunction, it would halt Microsoft-Activation Blizzard deal until an evidentiary hearing on August 2.

That falls after the set date for the deal to close on 18 July and may allow the parties to renegotiate.

The FTC is concerned the merger would allow Xbox to dominate the games market in part by making games such as Call of Duty Xbox-exclusive, something Microsoft has vehemently denied it would do.

Microsoft is arguing its third-place status makes the merger necessary to stay competitive with its rivals.

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