Microsoft executive prepared to outspend Sony in effort to solidify Xbox dominance

In 2019, Matt Booty, the chief of Microsoft’s Xbox Game Studios, encouraged Xbox CFO Tim Stuart to invest heavily in acquiring game content. The goal was to position the company for competition against Sony in subscriptions. This information was revealed in an email thread presented as part of the FTC v. Microsoft hearing.

Booty stated in a December 2019 email, “We (Microsoft) are in a very unique position to be able to go spend Sony out of business.” He proposed spending $2 billion or $3 billion in 2020 to prevent competitors from gaining an advantage in content in the future.

Booty emphasized the difficulty for new video streaming services to succeed at scale. He mentioned Google, Amazon, and Sony as competitors and highlighted content as a significant advantage. According to Booty, Sony was the only real competitor to Xbox Game Pass, as they had a similar number of subscribers and a two-year head start in the market.

Booty stated, “In games, Google is 3 to 4 years away from being able to have a studio up and running. Amazon has shown no ability to execute on game content. Content is the one moat that we have, in terms of a catalog that runs on current devices and capability to create new. Sony is really the only other player who could compete with Game Pass, and we have a 2-year and 10-million-subscriber lead.”

Microsoft claims that the email is outdated and that they never pursued the mentioned strategy. David Cuddy, general manager of public affairs at Microsoft, states, “This email is three and a half years old and predates the announcement of our acquisition by 25 months. It refers to industry trends we never pursued and is unrelated to the acquisition.” Additionally, the internal exchange was sealed as part of a separate lawsuit.

The email is part of a discussion about Xbox Game Pass, with the rest of the conversation redacted. It appears that Microsoft was considering changing their approach to day and date releases of their own games on Xbox Game Pass, which Booty expressed dissatisfaction with. He believed that reversing this decision would make it difficult to convince people of the viability of other Microsoft projects, such as Mixer or xCloud.

The email provides insight into Microsoft’s strategy and thinking regarding game content for Xbox Game Pass in 2019. Since then, Microsoft has made significant acquisitions, including Bethesda for $7.5 billion and the proposed $68.7 billion deal with Activision Blizzard. These deals far exceed the $2-3 billion figure mentioned by Booty in 2019.

Microsoft also considered acquiring Sega and Bungie. Xbox chief Phil Spencer even sought approval from Microsoft CEO Satya Nadella to approach Sega Sammy for a potential acquisition of their gaming studios. Both Sega and Bungie were part of a larger acquisition list compiled by Microsoft to strengthen Xbox Game Pass through key studio and mobile developer acquisitions.

Update, June 26th 18:15PM ET: Article updated with comment from Microsoft.