Microsoft claims Sony is paying for “blocking rights” to prevent developers from adding their content to Xbox Game Pass. The explosive claims are part of documents (Word doc) filed with Brazil’s national competition regulator and part of a review of Microsoft’s acquisition of Activision Blizzard.
“Microsoft’s ability to continue to expand Game Pass is hampered by Sony’s desire to prevent such growth,” Microsoft argued in an Aug. 9 filing with the Administrative Council for Economic Defense (CADE), as translated from Portuguese. “Sony pays for ‘blocking rights’ to prevent developers from adding content to Game Pass and other competing subscription services.”
Does this mean that Sony is evil and Microsoft is casually exposing some nefarious business practices? The reality is probably a bit more complicated on both sides. Sony may simply be paying for exclusive rights to its own streaming services, or it may have clauses in some publishing contracts that prevent some games it publishes from being published on competing subscription services.
It’s unclear exactly what Microsoft has in mind here, but game publishing contracts can be complicated, especially when streaming rights and subscription services are involved. Documents filed in Epic Games vs. Apple trial last year revealed that Microsoft was considering a cut in revenue sharing for PC games “in exchange for giving Microsoft streaming rights.”
If Microsoft had gone ahead with its plans, it could have resulted in the company securing exclusive streaming rights to some games, preventing them from being available on competing streaming services. It all depends on how publishing contracts are written, and both Microsoft and Sony regularly secure exclusive games that include timed releases, console exclusivity, and a lot of marketing dollars.
Microsoft is trying to convince Brazil’s CADE regulator that it should back out of the company’s proposed $68.7 billion acquisition of Activision Blizzard. While the Federal Trade Commission (FTC) is analyzing documents from Microsoft regarding its US acquisition, this correspondence is private. That’s not the case in Brazil, where its competition regulator has made public documents that provide a unique insight into the business competition between Microsoft and Sony.
Documents from Brazil’s CADE have been analyzed by Xbox and PlayStation fans over the past week, with ResetEra posters highlighting the salacious bits. The regulator is questioning Sony and other Microsoft rivals about the Activision Blizzard acquisition. Sony previously hit back at the Brazilian regulator, claiming it would be difficult for other developers to create a franchise to rival Activision’s Call of Duty and that it stands out “as a gaming category in its own right.”
Naturally, Microsoft disagrees, and Ubisoft, Riot Games, Bandai Namco and Google highlighted the competition Call of Duty in the form of Apex Legends, Battlefield, PUBGand more.
Microsoft also claims that adding Activision Blizzard content to Xbox Game Pass will actually increase competition in some way. “The inclusion of Activision Blizzard’s content in Game Pass does not impair the ability of other players to compete in the digital game distribution market,” Microsoft said in a filing, where the company also claimed it increased competition thanks to “high-quality content at -low immediate costs.’
Sony has yet to respond to this specific point, but at $9.99 per month for Xbox Game Pass, it’s easy to imagine users choosing this option to play titles like Call of Duty instead of paying $60 or more to buy and own the game.
Microsoft also claims that it does not distribute games such as Call of Duty in competing console stores “it just wouldn’t be profitable” for the company. Microsoft previously made it clear that it would keep Call of Duty on PlayStation. Microsoft says that a strategy of not distributing Activision Blizzard games to competing consoles would only be profitable if the games could attract large numbers of players to the Xbox ecosystem, resulting in revenue to offset losses from not selling those titles on competing consoles.
Whether or not Microsoft’s claims of “blocking rights” are accurate, it wouldn’t be the first time Sony has used financial incentives to block game developers. Sony stopped PS4 cross-platform play for years and implemented cross-revenue sharing for publishers who wanted to enable cross-play in their games.
Sony’s cross-platform revenue share forced publishers to pay Sony a royalty whenever PlayStation players contributed more than a certain percentage to a cross-platform game’s bottom line to “offset the revenue cut” from Sony allowing cross-play . Epic Games CEO Tim Sweeney testified last year that Sony is the only platform owner that requires this compensation for cross-play.
We’ve reached out to Sony for comment on Microsoft’s claims, and to Microsoft to clarify what it claims Sony is blocking. We have yet to hear back from either company, and we don’t expect either to comment on these explosive details. But we’ll be watching the documents from Brazil’s CADE closely in the coming days to see if and how Sony responds to Microsoft’s claims.