Microsoft claims that 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 has been hindered by Sony’s desire to prevent such growth,” Microsoft said 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 inadvertently exposing some nefarious business practices? The reality is probably a bit more complicated on both sides. Sony could simply be paying for exclusive rights to its own streaming services, or it could have clauses in some publishing contracts that prohibit some of the games it publishes from being published on competing subscription services.
It’s unclear exactly what Microsoft is referring to here, but game publishing contracts can be complicated, especially when it comes to streaming rights and subscription services. Documents submitted in Epic Games vs. Apple Last year’s lawsuit revealed that Microsoft was considering a lower share of revenue from PC games “in exchange for granting Microsoft streaming rights.”
If Microsoft were to go ahead with its plans, it could result in the company gaining exclusive streaming rights for some games, making them impossible to access on competing streaming services. It all depends on how publishing contracts are structured, and both Microsoft and Sony routinely defend exclusive games that involve delayed releases, console exclusivity, and lots of marketing dollars.
Microsoft is trying to convince Brazilian regulator CADE that it should reject the company’s proposed $68.7 billion acquisition of Activision Blizzard. While the Federal Trade Commission (FTC) is reviewing documents from Microsoft about its US acquisition, this correspondence is private. That’s not the case in Brazil, where the competition regulator is offering 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 posters on ResetEra highlighting the juicy bits. The regulator is questioning Sony and other Microsoft rivals about the acquisition of Activision Blizzard. Sony previously hit back at Brazil’s regulator, saying it would be difficult for other developers to create a franchise that could compete with Activision. Call of Duty and that it stands out “as a category of games in its own right.”
Naturally, Microsoft disagrees, and Ubisoft, Riot Games, Bandai Namco and Google have all highlighted the competition Call of Duty as Apex Legends, Battleground, 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 one document, where the company also says it increases competition through “high-quality content.” for lower immediate costs.”
Sony has yet to answer this question, but at $9.99 per month for Xbox Game Pass, it’s easy to imagine consumers opting for this option to play games like Call of Duty instead of paying $60 or more to buy the game and get it.
Microsoft also claims not to distribute games as Call of Duty in competing console stores “simply wouldn’t be profitable” for the company. Previously, Microsoft made it clear what would be stored Call of Duty on PlayStation. Microsoft says that the strategy of not distributing Activision Blizzard games on rival consoles will only be profitable if the games can attract a large number of players to the Xbox ecosystem, causing revenue to offset losses from sales of those games on rival consoles.
Whether or not Microsoft’s claims about “blocking rights” are accurate, this isn’t the first time Sony has used financial incentives to block game developers. Sony has held back PS4 cross-platform play for years and implemented cross-play revenue sharing for publishers who wanted to enable cross-play in their games.
Sony’s cross-platform revenue share forced publishers to pay Sony royalties whenever PlayStation players contributed more than a certain percentage to the end result of a cross-platform game, to “compensate for the reduction in revenue” from Sony that allows cross-play. Epic Games CEO Tim Sweeney testified last year that Sony was the only platform owner to demand such compensation for crossplay.
We’ve reached out to Sony for comment on Microsoft’s claims, and to Microsoft for clarification on what Sony is allegedly blocking. We have yet to hear back from either company, and we don’t expect any of them to comment on these explosive details. But we’ll be taking a closer look at the Brazilian CADE documents in the coming days to see if Sony will respond to Microsoft’s claims.